A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Collectors Universe, Inc. (NASDAQ:CLCT) has paid a dividend to shareholders. It currently yields 4.0%. Should it have a place in your portfolio? Let’s take a look at Collectors Universe in more detail.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does Collectors Universe fit our criteria?
The current trailing twelve-month payout ratio for CLCT is 102%, 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.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Collectors Universe as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Collectors Universe produces a yield of 4.0%, which is high for Consumer Services stocks.
Now you know to keep in mind the reason why investors should be careful investing in Collectors Universe for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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 fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CLCT’s future growth? Take a look at our free research report of analyst consensus for CLCT’s outlook.
- Valuation: What is CLCT 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 CLCT 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.