There is a lot to be liked about The Go-Ahead Group plc (LON:GOG) as an income stock. It has paid dividends over the past 10 years. The company is currently worth UK£666m, and now yields roughly 6.4%. Should it have a place in your portfolio? Let’s take a look at Go-Ahead Group in more detail.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Go-Ahead Group pass our checks?
Go-Ahead Group has a trailing twelve-month payout ratio of 49%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 63% which, assuming the share price stays the same, leads to a dividend yield of 6.4%. However, EPS is forecasted to fall to £1.58 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Go-Ahead Group produces a yield of 6.4%, which is on the low-side for Transportation stocks.
Considering the dividend attributes we analyzed above, Go-Ahead 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three important aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for GOG’s future growth? Take a look at our free research report of analyst consensus for GOG’s outlook.
- Valuation: What is GOG 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 GOG 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 email@example.com.