Why Outfront Media Inc (NYSE:OUT)’s 7.34% Dividend Is Not A Good Reason To Buy
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 4 years, Outfront Media Inc (NYSE:OUT) has returned an average of 6.00% per year to shareholders in terms of dividend yield. Does Outfront Media tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Outfront Media
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share risen in the past couple of years?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
How does Outfront Media fare?
REITs are a special-case dividend payer. This is because a high percentage of their earnings are required to be paid out as dividends. The current trailing twelve-month payout ratio for OUT is 153.20%, meaning that a portion of dividend payments are funded by retained earnings. In the near future, analysts are predicting a lower payout ratio of 135.18%, leading to a dividend yield of 7.85%. However, EPS should increase to $1.05, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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. The reality is that it is too early to consider Outfront Media as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Outfront Media has a yield of 7.34%, which is high for REITs stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Outfront Media for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. Below, I’ve compiled three essential factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for OUT’s future growth? Take a look at our free research report of analyst consensus for OUT’s outlook.
Valuation: What is OUT 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 OUT is currently mispriced by the market.
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.
