How Does J Sainsbury plc (LON:SBRY) Fare As A Dividend Stock?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 10 years, J Sainsbury plc (LSE:SBRY) has returned an average of 5.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at J Sainsbury in more detail. See our latest analysis for J Sainsbury
How I analyze 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 paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
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?
Does J Sainsbury pass our checks?
J Sainsbury has a trailing twelve-month payout ratio of 92.92%, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect SBRY’s payout to fall into a more sustainable range of 50.54% of its earnings, which leads to a dividend yield of around 4.18%. Furthermore, EPS should increase to £0.18, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. Dividend payments from J Sainsbury have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends. Compared to its peers, J Sainsbury has a yield of 3.97%, which is high for Consumer Retailing stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into J Sainsbury’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. There are three relevant factors you should further examine:
1. Future Outlook: What are well-informed industry analysts predicting for SBRY’s future growth? Take a look at our free research report of analyst consensus for SBRY’s outlook.
2. Valuation: What is SBRY 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 SBRY is currently mispriced by the market.
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.
