Yahoo Finance Should You Buy Charles Stanley Group plc (LON:CAY) For Its Dividend?
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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Charles Stanley Group plc (LON:CAY) has paid dividends to shareholders, and these days it yields 3.1%. Should it have a place in your portfolio? Let’s take a look at Charles Stanley Group in more detail.
See our latest analysis for Charles Stanley Group
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it the top 25% annual dividend yield payer?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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?
How does Charles Stanley Group fare?
Charles Stanley Group has a trailing twelve-month payout ratio of 56%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 50% which, assuming the share price stays the same, leads to a dividend yield of around 4.7%. However, EPS should increase to £0.19, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from Charles Stanley Group have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Relative to peers, Charles Stanley Group generates a yield of 3.1%, which is high for Capital Markets stocks but still below the market’s top dividend payers.
Next Steps:
Taking all the above into account, Charles Stanley Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. I’ve put together three fundamental factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for CAY’s future growth? Take a look at our free research report of analyst consensus for CAY’s outlook.
Valuation: What is CAY 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 CAY 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
