Be Careful About Buying Paramount Group Inc (NYSE:PGRE) For The 2.74% Dividend, Here’s Why
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 3 years Paramount Group Inc (NYSE:PGRE) has returned an average of 2.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Paramount Group in more detail. Check out our latest analysis for Paramount Group
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it paying an annual yield above 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?
Does earnings amply cover its dividend payments?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Paramount Group fare?
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 company currently pays out 104.10% of its earnings as a dividend, according to its trailing twelve-month data, meaning that a portion of dividend payments are funded by retained earnings. Furthermore, analysts are forecasting the payout ratio to exceed earnings going forward, leading to a future of uncertainty around the stability of PGRE’s dividend income. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Paramount Group 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. Relative to peers, Paramount Group generates a yield of 2.74%, which is on the low-side for REITs stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Paramount Group for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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 pertinent factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for PGRE’s future growth? Take a look at our free research report of analyst consensus for PGRE’s outlook.
Valuation: What is PGRE 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 PGRE 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.
