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 4 years, Foresight Energy LP (NYSE:FELP) has returned an average of 7.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Foresight Energy in more detail. See our latest analysis for Foresight Energy
5 checks you should use to assess 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 amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does Foresight Energy fit our criteria?
The current payout ratio for FELP is negative, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings.
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 Foresight Energy as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Foresight Energy has a yield of 5.87%, which is high for Oil and Gas stocks.
After digging a little deeper into Foresight Energy’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. 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. There are three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for FELP’s future growth? Take a look at our free research report of analyst consensus for FELP’s outlook.
- Valuation: What is FELP 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 FELP 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.