Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, C&C Group plc (ISE:GCC) has been paying a dividend to shareholders. Today it yields 4.5%. Should it have a place in your portfolio? Let’s take a look at C&C Group in more detail.
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5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- 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 be able to continue to payout at the current rate in the future?
Does C&C Group pass our checks?
C&C Group has a trailing twelve-month payout ratio of 63%, which means that the dividend is covered by earnings. However, going forward, analysts expect GCC’s payout to fall to 53% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 4.8%. However, EPS should increase to €0.28, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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.
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. Not only have dividend payouts from C&C Group fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, C&C Group generates a yield of 4.5%, which is high for Beverage stocks.
With this in mind, I definitely rank C&C Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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 aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for GCC’s future growth? Take a look at our free research report of analyst consensus for GCC’s outlook.
- Valuation: What is GCC 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 GCC 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 firstname.lastname@example.org.