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If you are interested in cashing in on Black Hills Corporation’s (NYSE:BKH) upcoming dividend of US$0.51 per share, you only have 4 days left to buy the shares before its ex-dividend date, 14 February 2019, in time for dividends payable on the 01 March 2019. Should you diversify into Black Hills and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Black Hills fare?
The company currently pays out 38% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect BKH’s payout to increase to 60% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.1%. However, EPS is forecasted to fall to $3.43 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. BKH has increased its DPS from $1.42 to $2.02 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes BKH a true dividend rockstar.
Relative to peers, Black Hills has a yield of 2.9%, which is on the low-side for Integrated Utilities stocks.
With this in mind, I definitely rank Black Hills as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three relevant aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for BKH’s future growth? Take a look at our free research report of analyst consensus for BKH’s outlook.
- Valuation: What is BKH worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BKH is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.