Does Fresnillo PLC (LON:FRES) Have A Place In Your Portfolio?

A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Fresnillo PLC (LON:FRES) has returned to shareholders over the past 10 years, an average dividend yield of 2.00% annually. Does Fresnillo tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View out our latest analysis for Fresnillo

5 questions I ask before picking a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is it the top 25% annual dividend yield payer?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has the amount of dividend per share grown over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

LSE:FRES Historical Dividend Yield June 22nd 18

Does Fresnillo pass our checks?

The company currently pays out 53.11% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 54.16%, leading to a dividend yield of 2.53%. Furthermore, EPS is forecasted to fall to $0.65 in the upcoming year.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, Fresnillo generates a yield of 2.55%, which is on the low-side for Metals and Mining stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Fresnillo is definitely worth considering for investors looking to build a dedicated income portfolio. 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 essential factors you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for FRES’s future growth? Take a look at our free research report of analyst consensus for FRES’s outlook.

2. Valuation: What is FRES 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 FRES is currently mispriced by the market.

3. Other 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.