What To Know Before Buying Caltex Australia Limited (ASX:CTX) For Its Dividend
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, Caltex Australia Limited (ASX:CTX) has returned an average of 3.00% per year to shareholders in terms of dividend yield. Does Caltex Australia tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Caltex Australia
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has dividend per share risen in the past couple of years?
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?
Does Caltex Australia pass our checks?
The current trailing twelve-month payout ratio for the stock is 51.01%, which means that the dividend is covered by earnings. Going forward, analysts expect CTX’s payout to remain around the same level at 51.62% of its earnings, which leads to a dividend yield of around 3.93%. Moreover, EPS is forecasted to fall to A$2.32 in the upcoming year. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although CTX’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time. In terms of its peers, Caltex Australia generates a yield of 4.01%, which is high for Oil and Gas stocks but still below the market’s top dividend payers.
Next Steps:
Taking into account the dividend metrics, Caltex Australia ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three important aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for CTX’s future growth? Take a look at our free research report of analyst consensus for CTX’s outlook.
Valuation: What is CTX 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 CTX 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 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.
