Should You Buy Dignity plc (LON:DTY) For Its Dividend?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, Dignity plc (LSE:DTY) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Dignity should have a place in your portfolio. Check out our latest analysis for Dignity
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key 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 is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
Does Dignity pass our checks?
The current trailing twelve-month payout ratio for the stock is 19.98%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect DTY’s payout to increase to 23.61% of its earnings, which leads to a dividend yield of around 2.90%. However, EPS is forecasted to fall to £1.13 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although DTY’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. In terms of its peers, Dignity generates a yield of 2.40%, which is high for Consumer Services stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank Dignity 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key aspects you should further examine:
1. Future Outlook: What are well-informed industry analysts predicting for DTY’s future growth? Take a look at our free research report of analyst consensus for DTY’s outlook.
2. Valuation: What is DTY 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 DTY is currently mispriced by the market.
3. 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.
