Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Ten Entertainment Group Plc (LSE:TEG) has returned an average dividend yield of 3.00% annually to shareholders. Should it have a place in your portfolio? Let’s take a look at Ten Entertainment Group in more detail. See our latest analysis for Ten Entertainment Group
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five 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 it increased its dividend per share amount over the past?
- Is it 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 well does Ten Entertainment Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 2.49%, which means that the dividend is covered by earnings. Going forward, analysts expect TEG’s payout to increase to 60.22% of its earnings, which leads to a dividend yield of around 5.18%. However, EPS is forecasted to fall to £0.18 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. 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. Unfortunately, it is really too early to view Ten Entertainment Group as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record. Compared to its peers, Ten Entertainment Group generates a yield of 2.46%, which is on the low-side for Hospitality stocks.
Taking all the above into account, Ten Entertainment Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. Future Outlook: What are well-informed industry analysts predicting for TEG’s future growth? Take a look at our free research report of analyst consensus for TEG’s outlook.
- 2. Valuation: What is TEG 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 TEG 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.