Investors who want to cash in on Alliance Resource Partners LP’s (NASDAQ:ARLP) upcoming dividend of $0.51 per share have only 3 days left to buy the shares before its ex-dividend date, 06 February 2018, in time for dividends payable on the 14 February 2018. 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 Alliance Resource Partners’s most recent financial data to examine its dividend characteristics in more detail. See our latest analysis for Alliance Resource Partners
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does Alliance Resource Partners fit our criteria?
The current trailing twelve-month payout ratio for the stock is 68.41%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 129.29%, leading to a dividend yield of around 10.75%. However, EPS is forecasted to fall to $2.21 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio. 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. Although ARLP’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. Compared to its peers, Alliance Resource Partners produces a yield of 9.95%, which is high for Oil and Gas stocks.
With these dividend metrics in mind, I definitely rank Alliance Resource Partners 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 important factors you should look at:
- 1. Future Outlook: What are well-informed industry analysts predicting for ARLP’s future growth? Take a look at our free research report of analyst consensus for ARLP’s outlook.
- 2. Valuation: What is ARLP 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 ARLP is currently mispriced by the market.
- 3. 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.