On the 14 September 2018, Parkland Fuel Corporation (TSE:PKI) will be paying shareholders an upcoming dividend amount of CA$0.098 per share. However, investors must have bought the company’s stock before 21 August 2018 in order to qualify for the payment. That means you have only 2 days left! 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 Parkland Fuel’s most recent financial data to examine its dividend characteristics in more detail.
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able 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?
Does Parkland Fuel pass our checks?
The company currently pays out 107.95% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect PKI’s payout to fall into a more sustainable range of 58.05% of its earnings, which leads to a dividend yield of around 2.90%. In addition to this, EPS should increase to CA$1.76, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. PKI investors will be well aware there has not been any increase in the dividend payments over the last 10 years, although the payments have at least been steady. However, income investors that value stability over growth may still find PKI appealing.
In terms of its peers, Parkland Fuel generates a yield of 2.88%, which is on the low-side for Oil and Gas stocks.
Taking all the above into account, Parkland Fuel is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. I’ve put together three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for PKI’s future growth? Take a look at our free research report of analyst consensus for PKI’s outlook.
- Valuation: What is PKI 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 PKI 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 email@example.com.