If you are interested in cashing in on Xcel Energy Inc.’s (NASDAQ:XEL) upcoming dividend of US$0.41 per share, you only have 3 days left to buy the shares before its ex-dividend date, 14 March 2019, in time for dividends payable on the 20 April 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Xcel Energy can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- 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 amount increased over the past?
- Can it afford 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 Xcel Energy pass our checks?
The current trailing twelve-month payout ratio for the stock is 62%, which means that the dividend is covered by earnings. Going forward, analysts expect XEL’s payout to remain around the same level at 61% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.0%. Moreover, EPS should increase to $2.61.
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.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of XEL it has increased its DPS from $0.95 to $1.62 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Xcel Energy generates a yield of 2.9%, which is on the low-side for Electric Utilities stocks.
With these dividend metrics in mind, I definitely rank Xcel Energy as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for XEL’s future growth? Take a look at our free research report of analyst consensus for XEL’s outlook.
- Valuation: What is XEL 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 XEL 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 email@example.com. 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.