Clarkson PLC (LON:CKN) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 3.1% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Clarkson in more detail.
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5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- 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?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Clarkson fit our criteria?
The current trailing twelve-month payout ratio for the stock is 77%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect CKN’s payout to fall to 62% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.6%. However, EPS should increase to £1.1, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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. In the case of CKN it has increased its DPS from £0.42 to £0.73 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Clarkson produces a yield of 3.1%, which is on the low-side for Shipping stocks.
Considering the dividend attributes we analyzed above, Clarkson is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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 relevant aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for CKN’s future growth? Take a look at our free research report of analyst consensus for CKN’s outlook.
- Valuation: What is CKN 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 CKN is currently mispriced by the market.
- 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.