A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. InterContinental Hotels Group PLC (LSE:IHG) has returned to shareholders over the past 10 years, an average dividend yield of 6.00% annually. Let’s dig deeper into whether InterContinental Hotels Group should have a place in your portfolio. See our latest analysis for InterContinental Hotels Group
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Is it able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does InterContinental Hotels Group pass our checks?
The company currently pays out 33.91% 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 higher payout ratio of 41.68%, leading to a dividend yield of 2.10%. However, EPS is forecasted to fall to $2.78 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. 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. Although IHG’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. Compared to its peers, InterContinental Hotels Group has a yield of 1.51%, which is on the low-side for Hospitality stocks.
Taking all the above into account, InterContinental Hotels Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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 essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for IHG’s future growth? Take a look at our free research report of analyst consensus for IHG’s outlook.
- Valuation: What is IHG 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 IHG 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.