Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years Aecon Group Inc (TSE:ARE) has returned an average of 2.00% per year to investors in the form of dividend payouts. Does Aecon Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Aecon Group
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- 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?
Does Aecon Group pass our checks?
The current trailing twelve-month payout ratio for ARE is 108.13%, which means that the dividend is not well-covered by its earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. ARE has increased its DPS from CA$0.20 to CA$0.50 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 ARE a true dividend rockstar.
Relative to peers, Aecon Group generates a yield of 3.23%, which is high for Construction stocks but still below the market’s top dividend payers.
Taking all the above into account, Aecon Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three relevant aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for ARE’s future growth? Take a look at our free research report of analyst consensus for ARE’s outlook.
- Valuation: What is ARE 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 ARE is currently mispriced by the market.
- 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.