Consider This Before Buying NRC Group ASA (OB:NRC) For The 2.4% Dividend
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. NRC Group ASA (OB:NRC) has paid a dividend to shareholders in the last few years. It currently yields 2.4%. Let’s dig deeper into whether NRC Group should have a place in your portfolio.
View our latest analysis for NRC Group
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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 it increased its dividend per share amount 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?
How does NRC Group fare?
NRC Group has a trailing twelve-month payout ratio of 52%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect NRC’s payout to fall to 41% of its earnings, which leads to a dividend yield of 3.7%. However, EPS should increase to NOK5.42, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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 NRC Group as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, NRC Group generates a yield of 2.4%, which is on the low-side for Construction stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in NRC 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for NRC’s future growth? Take a look at our free research report of analyst consensus for NRC’s outlook.
Valuation: What is NRC 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 NRC 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 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 editorial-team@simplywallst.com.
