Over the past 10 years Severn Trent Plc (LSE:SVT) has returned an average of 4.00% per year from dividend payouts. The company is currently worth UK£4.29B, and now yields roughly 4.63%. Does Severn Trent tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Severn Trent
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share amount increased over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Severn Trent pass our checks?
Severn Trent has a trailing twelve-month payout ratio of 67.28%, which means that the dividend is covered by earnings. Going forward, analysts expect SVT’s payout to remain around the same level at 71.82% of its earnings, which leads to a dividend yield of around 4.97%. Moreover, EPS is forecasted to fall to £1.21 in the upcoming year. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. SVT has increased its DPS from £0.63 to £0.87 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 SVT a true dividend rockstar. Relative to peers, Severn Trent has a yield of 4.63%, which is high for Water Utilities stocks.
Keeping in mind the dividend characteristics above, Severn Trent is definitely worth considering for investors 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:
1. Future Outlook: What are well-informed industry analysts predicting for SVT’s future growth? Take a look at our free research report of analyst consensus for SVT’s outlook.
2. Valuation: What is SVT 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 SVT 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.