A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. British & American Investment Trust plc (LSE:BAF) has returned to shareholders over the past 10 years, an average dividend yield of 10.00% annually. Does British & American Investment Trust tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for British & American Investment Trust
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- 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?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does British & American Investment Trust fit our criteria?
The current payout ratio for BAF is negative, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. BAF has increased its DPS from £0.06 to £0.09 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes BAF a true dividend rockstar. In terms of its peers, British & American Investment Trust produces a yield of 11.47%, which is high for Capital Markets stocks.
With these dividend metrics in mind, I definitely rank British & American Investment Trust as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. There are three relevant aspects you should further examine:
- Historical Performance: What has BAF’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on British & American Investment Trust’s board and the CEO’s back ground.
- 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 pass 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.