Consider This Before Buying Stifel Financial Corp (NYSE:SF) For The 1.0% Dividend
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Stifel Financial Corp (NYSE:SF) has started paying a dividend to shareholders. It currently trades on a yield of 1.0%. Let’s dig deeper into whether Stifel Financial should have a place in your portfolio.
See our latest analysis for Stifel Financial
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it paying an annual yield above 75% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
Does Stifel Financial pass our checks?
The current trailing twelve-month payout ratio for the stock is 12%, which means that the dividend is covered by earnings. Going forward, analysts expect SF’s payout to remain around the same level at 12% of its earnings, which leads to a dividend yield of around 1.3%. Moreover, EPS should increase to $5.32.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. The reality is that it is too early to consider Stifel Financial 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 SF one as a stable dividend player.
Compared to its peers, Stifel Financial produces a yield of 1.0%, which is on the low-side for Capital Markets stocks.
Next Steps:
After digging a little deeper into Stifel Financial’s yield, it’s easy to see why you should be cautious investing in the company just 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three important factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for SF’s future growth? Take a look at our free research report of analyst consensus for SF’s outlook.
Valuation: What is SF 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 SF 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.
