Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. National Bankshares Inc (NASDAQ:NKSH) has returned to shareholders over the past 10 years, an average dividend yield of 3.00% annually. Should it have a place in your portfolio? Let’s take a look at National Bankshares in more detail.
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% 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?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does National Bankshares pass our checks?
The current trailing twelve-month payout ratio for the stock is 58.27%, 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 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. NKSH has increased its DPS from $0.78 to $1.19 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes NKSH a true dividend rockstar.
Relative to peers, National Bankshares generates a yield of 2.54%, which is on the low-side for Banks stocks.
With these dividend metrics in mind, I definitely rank National Bankshares as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 key aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NKSH’s future growth? Take a look at our free research report of analyst consensus for NKSH’s outlook.
- Valuation: What is NKSH 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 NKSH is currently mispriced by the market.
- 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.