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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Generation Development Group Limited (ASX:GDG) has paid a dividend to shareholders. It currently yields 2.3%. Should it have a place in your portfolio? Let’s take a look at Generation Development Group in more detail.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has the amount of dividend per share grown over the past?
Is is able 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 does Generation Development Group fare?
The company currently pays out more than double of its earnings as a dividend, according to its trailing trailing twelve-month data, meaning that the dividend is predominantly funded by retained earnings. In the near future, analysts are predicting a more sensible payout ratio of 109%, leading to a dividend yield of 4.2%. Moreover, EPS should increase to A$0.049, 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 there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. GDG investors will be well aware the dividend payments are lower today than they were 10 years ago, although the payments have at least been steady. However, income investors that value stability over growth may still find GDG appealing.
Compared to its peers, Generation Development Group generates a yield of 2.3%, which is on the low-side for Insurance stocks.
After digging a little deeper into Generation Development Group’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. 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. I’ve put together three relevant factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for GDG’s future growth? Take a look at our free research report of analyst consensus for GDG’s outlook.
Historical Performance: What has GDG’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 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.