Over the past 10 years Agrium Inc (TSX:AGU) has returned an average of 2.00% per year from dividend payouts. The company is currently worth CA$19.98B, and now yields roughly 2.42%. Should it have a place in your portfolio? Let’s take a look at Agrium in more detail. View our latest analysis for Agrium
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment or significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is it able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Agrium fit our criteria?
The current trailing twelve-month payout ratio for the stock is 87.50%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 47.81%, leading to a dividend yield of around 3.10%. However, EPS should increase to $5.68, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. In the case of AGU it has increased its DPS from $0.11 to $3.5 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes AGU a true dividend rockstar. In terms of its peers, Agrium generates a yield of 2.42%, which is high for Chemicals stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, Agrium 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 fundamental aspects you should look at:
- 1. Future Outlook: What are well-informed industry analysts predicting for AGU’s future growth? Take a look at our free research report of analyst consensus for AGU’s outlook.
- 2. Valuation: What is AGU 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 AGU 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.