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There is a lot to be liked about Camden National Corporation (NASDAQ:CAC) as an income stock. It has paid dividends over the past 10 years. The company is currently worth US$629m, and now yields roughly 3.0%. Does Camden National tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Can it afford 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?
How well does Camden National fit our criteria?
The company currently pays out 34% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 37% which, assuming the share price stays the same, leads to a dividend yield of 3.2%. In addition to this, EPS should increase to $3.48. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. CAC has increased its DPS from $0.67 to $1.2 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes CAC a true dividend rockstar.
Relative to peers, Camden National generates a yield of 3.0%, which is on the low-side for Banks stocks.
With this in mind, I definitely rank Camden National as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CAC’s future growth? Take a look at our free research report of analyst consensus for CAC’s outlook.
- Valuation: What is CAC 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 CAC is currently mispriced by the market.
- Other 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.