Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 10 years, CF Industries Holdings Inc (NYSE:CF) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Does CF Industries Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for CF Industries Holdings
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does CF Industries Holdings pass our checks?
The current payout ratio for CF 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. In the case of CF it has increased its DPS from $0.08 to $1.2 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 CF a true dividend rockstar. In terms of its peers, CF Industries Holdings has a yield of 3.08%, which is high for Chemicals stocks but still below the market’s top dividend payers.
Whilst there are few things you may like about CF Industries Holdings from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 fundamental aspects you should look at:
- 1. Future Outlook: What are well-informed industry analysts predicting for CF’s future growth? Take a look at our free research report of analyst consensus for CF’s outlook.
- 2. Valuation: What is CF 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 CF is currently mispriced by the market.
- 3. 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.