Over the past 10 years Babcock International Group plc (LSE:BAB) has grown its dividend payouts from £0.09 to £0.28. With a market cap of UK£3.40B, Babcock International Group pays out 44.52% of its earnings, leading to a 4.18% yield. Let me elaborate on you why the stock stands out for income investors like myself. Check out our latest analysis for Babcock International Group
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically: Its annual yield is among the top 25% of dividend payers It has paid dividend every year without dramatically reducing payout in the past Its dividend per share amount has increased over the past It can afford to pay the current rate of dividends from its earnings It is able to continue to payout at the current rate in the future
High Yield And Dependable
The company’s dividend yield stands at 4.18%, which is high for Commercial Services stocks. But the real reason Babcock International Group stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
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 BAB it has increased its DPS from £0.09 to £0.28 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. Babcock International Group has a trailing twelve-month payout ratio of 44.52%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect BAB’s payout to fall to 36.38% of its earnings, which leads to a dividend yield of around 4.56%. However, EPS should increase to £0.66, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
Babcock International Group’s strong dividend attributes make it, without a doubt, a stock dividend investors should be considering for their portfolios. However, given this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for BAB’s future growth? Take a look at our free research report of analyst consensus for BAB’s outlook.
- Valuation: What is BAB 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 BAB is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better 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.