Over the past 10 years MDU Resources Group, Inc. (NYSE:MDU) has been paying dividends to shareholders. The stock currently pays out a dividend yield of 3.1%, and has a market cap of US$5.1b. Does MDU Resources Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five 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?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does MDU Resources Group pass our checks?
The current trailing twelve-month payout ratio for the stock is 50%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 50% which, assuming the share price stays the same, leads to a dividend yield of 3.1%. Furthermore, EPS is forecasted to fall to $1.47 in the upcoming year.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. MDU has increased its DPS from $0.62 to $0.81 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.
In terms of its peers, MDU Resources Group produces a yield of 3.1%, which is on the low-side for Integrated Utilities stocks.
Keeping in mind the dividend characteristics above, MDU Resources Group is definitely worth considering for investors looking to build a dedicated income 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. There are three essential factors you should further examine:
- Historical Performance: What has MDU’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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 firstname.lastname@example.org.