Finning International Inc (TSE:FTT) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 2.8% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Finning International in more detail.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- 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 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 well does Finning International fit our criteria?
The company currently pays out 48% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 36%, leading to a dividend yield of around 2.9%. However, EPS should increase to CA$1.99, 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’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of FTT it has increased its DPS from CA$0.44 to CA$0.80 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes FTT a true dividend rockstar.
In terms of its peers, Finning International has a yield of 2.8%, which is high for Trade Distributors stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Finning International as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for FTT’s future growth? Take a look at our free research report of analyst consensus for FTT’s outlook.
- Valuation: What is FTT 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 FTT 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 email@example.com.