Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Civitas Social Housing PLC (LSE:CSH) has returned an average dividend yield of 4.00% annually to shareholders. Let’s dig deeper into whether Civitas Social Housing should have a place in your portfolio. See our latest analysis for Civitas Social Housing
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Civitas Social Housing fare?
The company currently pays out 40.28% of its earnings as a dividend, according to its trailing twelve-month data, which is rather low compared to other REITs. Generally, REITs are expected to pay out the majority of its earnings to provide a regular income stream for their investors. 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. The reality is that it is too early to consider Civitas Social Housing as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether CSH one as a stable dividend player. In terms of its peers, Civitas Social Housing generates a yield of 4.83%, which is high for REITs stocks.
If you are building an income portfolio, then Civitas Social Housing is a complicated choice since it has some positive aspects as well as negative ones. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three relevant aspects you should further examine:
- Valuation: What is CSH 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 CSH is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Civitas Social Housing’s board and the CEO’s back ground.
- 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.