Over the past 10 years Super Retail Group Limited (ASX:SUL) has been paying dividends to shareholders. The company is currently worth AU$1.3b, and now yields roughly 7.0%. Let’s dig deeper into whether Super Retail Group should have a place in your portfolio.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How does Super Retail Group fare?
The current trailing twelve-month payout ratio for the stock is 75%, which means that the dividend is covered by earnings. However, going forward, analysts expect SUL’s payout to fall to 66% of its earnings. Assuming a constant share price, this equates to a dividend yield of 7.8%. However, EPS should increase to A$0.77, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. SUL has increased its DPS from A$0.13 to A$0.49 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 SUL a true dividend rockstar.
Compared to its peers, Super Retail Group produces a yield of 7.0%, which is high for Specialty Retail stocks.
With this in mind, I definitely rank Super Retail Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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. Below, I’ve compiled three important aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for SUL’s future growth? Take a look at our free research report of analyst consensus for SUL’s outlook.
- Valuation: What is SUL 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 SUL 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 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 firstname.lastname@example.org.