A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Acadian Timber Corp (TSE:ADN) has paid dividends to shareholders, and these days it yields 5.9%. Does Acadian Timber tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is is 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 does Acadian Timber fare?
Acadian Timber has a trailing twelve-month payout ratio of 71.5%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 134%, leading to a dividend yield of 5.9%. However, EPS is forecasted to fall to CA$0.78 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’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Compared to its peers, Acadian Timber generates a yield of 5.9%, which is high for Forestry stocks.
Keeping in mind the dividend characteristics above, Acadian Timber is definitely worth considering for investors looking to build a dedicated income portfolio. 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. There are three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for ADN’s future growth? Take a look at our free research report of analyst consensus for ADN’s outlook.
- Valuation: What is ADN 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 ADN 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 firstname.lastname@example.org.