How Does Empire Company Limited (TSE:EMP.A) Fare As A Dividend Stock?
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 10 years Empire Company Limited (TSX:EMP.A) has returned an average of 2.00% per year to investors in the form of dividend payouts. Does Empire tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Empire
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is their annual yield among the top 25% of dividend payers?
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?
Is is able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How does Empire fare?
The company currently pays out 124.88% of its earnings as a dividend, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect EMP.A’s payout to fall into a more sustainable range of 25.59% of its earnings, which leads to a dividend yield of 1.72%.
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. EMP.A has increased its DPS from CA$0.22 to CA$0.42 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. Compared to its peers, Empire generates a yield of 1.65%, which is high for consumer retailing stocks but still below the low risk savings rate.
Next Steps:
Whilst there are few things you may like about Empire from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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, 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 further examine:
1. Valuation: What is EMP.A 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 EMP.A is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Empire’s board and the CEO’s back ground.
3. 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.
