Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 3 years Liberty Tax Inc (NASDAQ:TAX) has returned an average of 5.00% per year to investors in the form of dividend payouts. Does Liberty Tax tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View out our latest analysis for Liberty Tax
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Liberty Tax fit our criteria?
Liberty Tax has a trailing twelve-month payout ratio of 70.04%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Liberty Tax as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Liberty Tax generates a yield of 7.23%, which is high for Consumer Services stocks.
Whilst there are few things you may like about Liberty Tax 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for TAX’s future growth? Take a look at our free research report of analyst consensus for TAX’s outlook.
- Valuation: What is TAX 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 TAX 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.