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There is a lot to be liked about Johnson Controls International plc (NYSE:JCI) as an income stock. It has paid dividends over the past 10 years. The stock currently pays out a dividend yield of 3.0%, and has a market cap of US$32b. Does Johnson Controls International tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown 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 Johnson Controls International pass our checks?
Johnson Controls International has a trailing twelve-month payout ratio of 41%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect JCI’s payout to remain around the same level at 39% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.2%. Furthermore, EPS should increase to $2.71.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. JCI has increased its DPS from $0.52 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. This is an impressive feat, which makes JCI a true dividend rockstar.
Compared to its peers, Johnson Controls International has a yield of 3.0%, which is high for Building stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Johnson Controls International as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that 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. There are three essential aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for JCI’s future growth? Take a look at our free research report of analyst consensus for JCI’s outlook.
- Valuation: What is JCI 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 JCI 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.
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 firstname.lastname@example.org. 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.