A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Central Pacific Financial Corp (NYSE:CPF) has returned to shareholders over the past 10 years, an average dividend yield of 2.00% annually. Should it have a place in your portfolio? Let’s take a look at Central Pacific Financial in more detail. See our latest analysis for Central Pacific Financial
5 questions I ask before picking 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 consistently paid a stable dividend without missing a payment or drastically cutting payout?
- 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 the company be able to keep paying dividend based on the future earnings growth?
Does Central Pacific Financial pass our checks?
Central Pacific Financial has a trailing twelve-month payout ratio of 51.65%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 37.90%, leading to a dividend yield of 2.56%. However, EPS should increase to $1.97, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. Dividend payments from Central Pacific Financial have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends. Relative to peers, Central Pacific Financial generates a yield of 2.45%, which is on the low-side for Banks stocks.
Taking all the above into account, Central Pacific Financial is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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. Below, I’ve compiled three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CPF’s future growth? Take a look at our free research report of analyst consensus for CPF’s outlook.
- Valuation: What is CPF 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 CPF 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.