Over the past 10 years CF Industries Holdings, Inc. (NYSE:CF) has been paying dividends to shareholders. The company is currently worth US$9.8b, and now yields roughly 2.8%. Should it have a place in your portfolio? Let’s take a look at CF Industries Holdings in more detail.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
Does CF Industries Holdings pass our checks?
CF Industries Holdings has a trailing twelve-month payout ratio of 40%, which means that the dividend is covered by earnings. Going forward, analysts expect CF’s payout to remain around the same level at 38% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.8%. Furthermore, EPS is forecasted to fall to $2.46 in the upcoming year.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of CF it has increased its DPS from $0.080 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 CF a true dividend rockstar.
Compared to its peers, CF Industries Holdings produces a yield of 2.8%, which is high for Chemicals stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, CF Industries Holdings 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, 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 essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CF’s future growth? Take a look at our free research report of analyst consensus for CF’s outlook.
- Valuation: What is CF 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 CF 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 firstname.lastname@example.org.