Is Grafton Group plc (LON:GFTU) A Smart Choice For Dividend Investors?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 8 years Grafton Group plc (LSE:GFTU) has returned an average of 2.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Grafton Group should have a place in your portfolio. View our latest analysis for Grafton 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:
Is it the top 25% annual dividend yield payer?
Has it consistently paid a stable dividend without missing a payment or drastically 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?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Grafton Group fit our criteria?
The company currently pays out 28.73% 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 a payout ratio of 28.95%, leading to a dividend yield of 2.32%. Moreover, EPS should increase to £0.58. 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 Grafton Group 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. Compared to its peers, Grafton Group generates a yield of 2.03%, which is on the low-side for Trade Distributors stocks.
Next Steps:
Whilst there are few things you may like about Grafton Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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, 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. Below, I’ve compiled three relevant factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for GFTU’s future growth? Take a look at our free research report of analyst consensus for GFTU’s outlook.
Valuation: What is GFTU 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 GFTU 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 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.
