A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. 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. Does Paramount Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Paramount Group
5 questions I ask before picking 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?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
Does Paramount Group pass our checks?
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 current trailing twelve-month payout ratio for PGRE is 105.62%, 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 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 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. Compared to its peers, Paramount Group generates a yield of 2.61%, which is on the low-side for REITs stocks.
Now you know to keep in mind the reason why investors should be careful investing in Paramount Group 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key factors you should look at:
- 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.