Should The Warehouse Group Limited (NZE:WHS) Be Part Of Your Dividend Portfolio?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, The Warehouse Group Limited (NZSE:WHS) has returned an average of 6.00% per year to shareholders in terms of dividend yield. Does Warehouse Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Warehouse Group
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 its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Can it afford 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?
How well does Warehouse Group fit our criteria?
Warehouse Group has a trailing twelve-month payout ratio of 78.02%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect WHS’s payout to remain around the same level at 77.49% of its earnings, which leads to a dividend yield of around 8.00%. In addition to this, EPS is forecasted to fall to NZ$0.18 in the upcoming year. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Warehouse Group fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends. Relative to peers, Warehouse Group produces a yield of 8.00%, which is high for Multiline Retail stocks.
Next Steps:
Taking into account the dividend metrics, Warehouse Group ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. There are three pertinent factors you should further research:
1. Future Outlook: What are well-informed industry analysts predicting for WHS’s future growth? Take a look at our free research report of analyst consensus for WHS’s outlook.
2. Valuation: What is WHS 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 WHS 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.
