Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 10 years Capital Southwest Corporation (NASDAQ:CSWC) has returned an average of 2.00% per year to investors in the form of dividend payouts. Does Capital Southwest tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Capital Southwest
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:
- 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 dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does Capital Southwest fit our criteria?
Capital Southwest has a trailing twelve-month payout ratio of 46.28%, meaning the dividend is sufficiently covered by earnings. 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 there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although CSWC’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time. In terms of its peers, Capital Southwest has a yield of 6.48%, which is high for Capital Markets stocks.
With these dividend metrics in mind, I definitely rank Capital Southwest 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, 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 important factors you should further research:
- 1. Future Outlook: What are well-informed industry analysts predicting for CSWC’s future growth? Take a look at our free research report of analyst consensus for CSWC’s outlook.
- 2. Valuation: What is CSWC 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 CSWC 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.