Yahoo Finance Should You Buy Christie Group plc (LON:CTG) For Its Dividend?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Christie Group plc (LON:CTG) has paid a dividend to shareholders. It currently yields 2.9%. Should it have a place in your portfolio? Let’s take a look at Christie Group in more detail.
View our latest analysis for Christie Group
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is their annual yield among the top 25% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share risen in the past couple of years?
Does earnings amply cover its dividend payments?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does Christie Group fit our criteria?
The company currently pays out 23% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect CTG’s payout to increase to 26% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.6%. However, EPS is forecasted to fall to £0.12 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider 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.
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. Not only have dividend payouts from Christie Group fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Relative to peers, Christie Group produces a yield of 2.9%, which is high for Professional Services stocks but still below the market’s top dividend payers.
Next Steps:
If Christie Group is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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. Below, I’ve compiled three key factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for CTG’s future growth? Take a look at our free research report of analyst consensus for CTG’s outlook.
Valuation: What is CTG 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 CTG 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.
