Is CSR Limited (ASX:CSR) A Great Dividend Stock?
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, CSR Limited (ASX:CSR) has paid dividends to shareholders, and these days it yields 7.0%. Does CSR tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for CSR
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:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
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 CSR fare?
CSR has a trailing twelve-month payout ratio of 71.9%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 73.7%, leading to a dividend yield of 6.4%. In addition to this, EPS should increase to A$0.38.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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 CSR have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
In terms of its peers, CSR has a yield of 7.0%, which is high for Basic Materials stocks.
Next Steps:
Considering the dividend attributes we analyzed above, CSR is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. There are three essential factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for CSR’s future growth? Take a look at our free research report of analyst consensus for CSR’s outlook.
Valuation: What is CSR 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 CSR 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 editorial-team@simplywallst.com.
