How Does Parkland Fuel Corporation (TSE:PKI) Fare As A Dividend Stock?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Parkland Fuel Corporation (TSE:PKI) has paid a dividend to shareholders. It currently yields 3.3%. Does Parkland Fuel tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Parkland Fuel
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5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it the top 25% annual dividend yield payer?
Has it paid dividend every year without dramatically reducing payout in the past?
Has the amount of dividend per share grown over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will it have the ability to keep paying its dividends going forward?
How well does Parkland Fuel fit our criteria?
The company currently pays out 86% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 34% which, assuming the share price stays the same, leads to a dividend yield of 3.3%. However, EPS should increase to CA$2.42, 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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality facing PKI investors is that whilst it has continued to pay shareholders dividend, dividends are lower today, than they were a decade ago. However, income investors that value stability over growth may still find PKI appealing.
In terms of its peers, Parkland Fuel generates a yield of 3.3%, which is on the low-side for Oil and Gas stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Parkland Fuel is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three relevant aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for PKI’s future growth? Take a look at our free research report of analyst consensus for PKI’s outlook.
Valuation: What is PKI 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 PKI 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 editorial-team@simplywallst.com.
