A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Southwest Georgia Financial Corporation (NYSEMKT:SGB) has paid a dividend to shareholders. It currently yields 2.1%. Let’s dig deeper into whether Southwest Georgia Financial should have a place in your portfolio.
5 checks you should do on 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?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford 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 Southwest Georgia Financial pass our checks?
The company currently pays out 28% of its earnings as a dividend, according to its trailing twelve-month data, 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.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality facing SGB investors is that whilst it has continued to pay shareholders dividend, there has not been any increase in the level of dividends paid in the past decade. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Relative to peers, Southwest Georgia Financial has a yield of 2.1%, which is on the low-side for Banks stocks.
Whilst there are few things you may like about Southwest Georgia Financial 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. There are three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SGB’s future growth? Take a look at our free research report of analyst consensus for SGB’s outlook.
- Valuation: What is SGB 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 SGB 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 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.