Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. NewRiver REIT plc (LSE:NRR) has returned to shareholders over the past 7 years, an average dividend yield of 6.00% annually. Does NewRiver REIT tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for NewRiver REIT
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- 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 dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does NewRiver REIT fit our criteria?
REITs are a special-case dividend payer. This is because a high percentage of their earnings are required to be paid out as dividends. NewRiver REIT has a trailing twelve-month payout ratio of 87.00%, which is in-line with most other REIT stocks. In the near future, analysts are predicting a payout ratio of 95.55%, leading to a dividend yield of around 6.86%. Furthermore, EPS should increase to £0.24. 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 is that it is too early to consider NewRiver REIT as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. In terms of its peers, NewRiver REIT has a yield of 6.65%, which is high for REITs stocks.
Keeping in mind the dividend characteristics above, NewRiver REIT is definitely worth considering for investors looking to build a dedicated income portfolio. 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. Below, I’ve compiled three fundamental aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NRR’s future growth? Take a look at our free research report of analyst consensus for NRR’s outlook.
- Valuation: What is NRR 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 NRR 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 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.