Should K2 Asset Management Holdings Ltd (ASX:KAM) Be Part Of Your Dividend Portfolio?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 10 years, K2 Asset Management Holdings Ltd (ASX:KAM) has returned an average of 8.00% per year to shareholders in terms of dividend yield. Does K2 Asset Management Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for K2 Asset Management Holdings
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it the top 25% annual dividend yield payer?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
Does K2 Asset Management Holdings pass our checks?
K2 Asset Management Holdings has a trailing twelve-month payout ratio of 30.87%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 95.47%, leading to a dividend yield of around 13.03%. However, EPS is forecasted to fall to A$0.02 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Dividend payments from K2 Asset Management Holdings have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. In terms of its peers, K2 Asset Management Holdings produces a yield of 12.16%, which is high for Capital Markets stocks.
Next Steps:
Whilst there are few things you may like about K2 Asset Management Holdings from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three relevant factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for KAM’s future growth? Take a look at our free research report of analyst consensus for KAM’s outlook.
Valuation: What is KAM 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 KAM 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.
