Should You Buy Trinseo S.A. (NYSE:TSE) For Its Dividend?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the last few years Trinseo S.A. (NYSE:TSE) has paid a dividend to shareholders. Today it yields 3.3%. Let’s dig deeper into whether Trinseo should have a place in your portfolio.
Check out our latest analysis for Trinseo
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5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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?
Does Trinseo pass our checks?
The current trailing twelve-month payout ratio for the stock is 16%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 18% which, assuming the share price stays the same, leads to a dividend yield of 3.5%.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Trinseo as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Trinseo produces a yield of 3.3%, which is high for Chemicals stocks but still below the market’s top dividend payers.
Next Steps:
If Trinseo is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for TSE’s future growth? Take a look at our free research report of analyst consensus for TSE’s outlook.
Valuation: What is TSE 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 TSE 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
