Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Regis Resources Limited (ASX:RRL) has been paying a dividend to shareholders. Today it yields 4.3%. Does Regis Resources tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Regis Resources pass our checks?
The current trailing twelve-month payout ratio for the stock is 46.2%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 50.3%, leading to a dividend yield of 4.9%. Moreover, EPS is forecasted to fall to A$0.32 in the upcoming year.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Regis Resources as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Regis Resources has a yield of 4.3%, which is high for Metals and Mining stocks but still below the market’s top dividend payers.
If you are building an income portfolio, then Regis Resources is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for RRL’s future growth? Take a look at our free research report of analyst consensus for RRL’s outlook.
- Valuation: What is RRL 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 RRL 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.