Does ADTRAN Inc (NASDAQ:ADTN) Have A Place In Your Portfolio?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, ADTRAN Inc (NASDAQ:ADTN) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at ADTRAN in more detail. See our latest analysis for ADTRAN
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five 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 dividend per share amount increased over the past?
Does earnings amply cover its dividend payments?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does ADTRAN fit our criteria?
ADTRAN has a trailing twelve-month payout ratio of more than 200% of earnings, meaning that the dividend is predominantly funded by retained earnings. However, going forward, analysts expect ADTN’s payout to fall into a more sustainable range of 63.75% of its earnings, which leads to a dividend yield of around 2.35%. EPS is also forecasted to fall to $-0.18 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality facing ADTN investors is that whilst it has continued to pay shareholders dividend, there has not been any increase in the level of dividends paid in the past decade. However, income investors that value stability over growth may still find ADTN appealing.
Relative to peers, ADTRAN generates a yield of 2.35%, which is on the low-side for Communications stocks.
Next Steps:
If ADTRAN is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. I’ve put together three relevant aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for ADTN’s future growth? Take a look at our free research report of analyst consensus for ADTN’s outlook.
Historical Performance: What has ADTN’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.
