Shares of MDU Resources Group Inc (NYSE:MDU) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.20 per share, investors must have owned the shares prior to 12 September 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at MDU Resources Group’s most recent financial data to examine its dividend characteristics in more detail.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does MDU Resources Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 52.7%, which means that the dividend is covered by earnings. Going forward, analysts expect MDU’s payout to remain around the same level at 50.6% of its earnings, which leads to a dividend yield of around 2.8%. Moreover, EPS is forecasted to fall to $1.44 in the upcoming year.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of MDU it has increased its DPS from $0.62 to $0.79 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes MDU a true dividend rockstar.
Relative to peers, MDU Resources Group produces a yield of 2.8%, which is on the low-side for Integrated Utilities stocks.
With this in mind, I definitely rank MDU Resources Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 research:
- Valuation: What is MDU 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 MDU is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on MDU Resources Group’s board and the CEO’s back ground.
- 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 email@example.com.