Is DCP Midstream LP (NYSE:DCP) A Smart Pick For Income Investors?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. DCP Midstream LP (NYSE:DCP) has returned to shareholders over the past 10 years, an average dividend yield of 9.00% annually. Let’s dig deeper into whether DCP Midstream should have a place in your portfolio. See our latest analysis for DCP Midstream
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 its annual yield among the top 25% of dividend-paying companies?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has dividend per share risen in the past couple of years?
Can it afford to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does DCP Midstream fit our criteria?
DCP Midstream has a trailing twelve-month payout ratio of more than 200% of earnings, meaning that the dividend is predominantly funded by retained earnings. Going forward, analysts expect DCP’s payout to fall to 151.68% of its earnings, which leads to a dividend yield of around 7.57%. In addition to this, EPS should increase to $1.52, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of DCP it has increased its DPS from $2.36 to $3.12 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. This is an impressive feat, which makes DCP a true dividend rockstar. Compared to its peers, DCP Midstream has a yield of 7.46%, which is high for Oil and Gas stocks.
Next Steps:
Considering the dividend attributes we analyzed above, DCP Midstream 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three relevant factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for DCP’s future growth? Take a look at our free research report of analyst consensus for DCP’s outlook.
Valuation: What is DCP 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 DCP 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 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.
