There is a lot to be liked about Camden National Corporation (NASDAQ:CAC) as an income stock. It has paid dividends over the past 10 years. The stock currently pays out a dividend yield of 2.8%, and has a market cap of US$656m. Let’s dig deeper into whether Camden National should have a place in your portfolio.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does Camden National pass our checks?
The company currently pays out 48% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 33%, leading to a dividend yield of around 2.8%. However, EPS should increase to $3.44, 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 company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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 CAC it has increased its DPS from $0.67 to $1.2 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 CAC a true dividend rockstar.
Relative to peers, Camden National produces a yield of 2.8%, which is high for Banks stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, Camden National is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three key aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for CAC’s future growth? Take a look at our free research report of analyst consensus for CAC’s outlook.
- Valuation: What is CAC 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 CAC 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.