A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Over the past 10 years, Equity LifeStyle Properties Inc (NYSE:ELS) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Equity LifeStyle Properties should have a place in your portfolio. View our latest analysis for Equity LifeStyle Properties
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is it able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Equity LifeStyle Properties fit our criteria?
REITs are a special-case dividend payer. This is because a high percentage of their earnings are required to be paid out as dividends. The current trailing twelve-month payout ratio for ELS is 89.33%, which is in-line with most other REIT stocks. 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 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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. Compared to its peers, Equity LifeStyle Properties generates a yield of 2.53%, which is on the low-side for REITs stocks.
If you are building an income portfolio, then Equity LifeStyle Properties is a complicated choice since it has some positive aspects as well as negative ones. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three important aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for ELS’s future growth? Take a look at our free research report of analyst consensus for ELS’s outlook.
- Valuation: What is ELS 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 ELS 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.