Yahoo Finance How Does Greencore Group plc (LON:GNC) Fare As A Dividend Stock?
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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Greencore Group plc (LON:GNC) has paid a dividend to shareholders. It currently yields 2.8%. Let's dig deeper into whether Greencore Group should have a place in your portfolio.
View our latest analysis for Greencore Group
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is its annual yield among the top 25% of dividend-paying companies?
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?
Can it afford to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Greencore Group pass our checks?
The company currently pays out more than double of its earnings as a dividend, according to its trailing trailing twelve-month data, meaning that the dividend is predominantly funded by retained earnings. In the near future, analysts are predicting a more sensible payout ratio of 35% which, assuming the share price stays the same, leads to a dividend yield of 3.2%. Moreover, EPS should increase to £0.18, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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 Greencore 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.
In terms of its peers, Greencore Group has a yield of 2.8%, which is high for Food stocks but still below the market's top dividend payers.
Next Steps:
After digging a little deeper into Greencore Group's yield, it's easy to see why you should be cautious investing in the company just for the dividend. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I've put together three relevant factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for GNC’s future growth? Take a look at our free research report of analyst consensus for GNC’s outlook.
Valuation: What is GNC 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 GNC 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.
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 editorial-team@simplywallst.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.
