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Arrow Financial Corporation (NASDAQ:AROW) has pleased shareholders over the past 10 years, by paying out dividends. The stock currently pays out a dividend yield of 3.2%, and has a market cap of US$469m. Should it have a place in your portfolio? Let’s take a look at Arrow Financial in more detail.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does Arrow Financial pass our checks?
Arrow Financial has a trailing twelve-month payout ratio of 40%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 40% which, assuming the share price stays the same, leads to a dividend yield of 3.3%. Moreover, EPS should increase to $2.54.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of AROW it has increased its DPS from $0.77 to $1.04 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. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Arrow Financial generates a yield of 3.2%, which is high for Banks stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Arrow Financial 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. There are three fundamental factors you should further research:
- Valuation: What is AROW 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 AROW is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Arrow Financial’s board and the CEO’s back ground.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.