Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Vail Resorts, Inc. (NYSE:MTN) has paid dividends to shareholders, and these days it yields 2.8%. Should it have a place in your portfolio? Let’s take a look at Vail Resorts in more detail.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 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 its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How does Vail Resorts fare?
The company currently pays out 79% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect MTN’s payout to remain around the same level at 86% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.7%. In addition to this, EPS should increase to $8.01.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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 is that it is too early to consider Vail Resorts as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Vail Resorts produces a yield of 2.8%, which is on the low-side for Hospitality stocks.
If you are building an income portfolio, then Vail Resorts is a complicated choice since it has some positive aspects as well as negative ones. 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 important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for MTN’s future growth? Take a look at our free research report of analyst consensus for MTN’s outlook.
- Valuation: What is MTN 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 MTN is currently mispriced by the market.
- 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.