Should The Restaurant Group plc (LON:RTN) Be Part Of Your Dividend Portfolio?
Over the past 10 years The Restaurant Group plc (LSE:RTN) has returned an average of 4.00% per year from dividend payouts. The company is currently worth UK£634.80M, and now yields roughly 5.66%. Should it have a place in your portfolio? Let’s take a look at Restaurant Group in more detail. View our latest analysis for Restaurant Group
How I analyze 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 or significantly cutting payout?
Has dividend per share risen in the past couple of years?
Is its earnings sufficient to payout dividend at the current rate?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Restaurant Group fit our criteria?
The current trailing twelve-month payout ratio for RTN is 105.87%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect RTN’s payout to fall into a more sustainable range of 69.81% of its earnings, which leads to a dividend yield of around 5.36%. Furthermore, EPS should increase to £0.2, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of RTN it has increased its DPS from £0.07 to £0.17 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 RTN a true dividend rockstar. In terms of its peers, Restaurant Group has a yield of 5.66%, which is high for Hospitality stocks.
Next Steps:
Considering the dividend attributes we analyzed above, Restaurant Group is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three relevant aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for RTN’s future growth? Take a look at our free research report of analyst consensus for RTN’s outlook.
Valuation: What is RTN 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 RTN 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.
