Does Pets at Home Group Plc (LON:PETS) Have A Place In Your Portfolio?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 4 years Pets at Home Group Plc (LON:PETS) has returned an average of 4.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether at Home Group should have a place in your portfolio.

View our latest analysis for at Home Group

Here’s how I find good dividend stocks

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

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

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

• Has dividend per share risen in the past couple of years?

• 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:PETS Historical Dividend Yield August 22nd 18

How well does at Home Group fit our criteria?

The company currently pays out 59.70% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 54.99%, leading to a dividend yield of 6.20%. Moreover, EPS should increase to £0.14.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view at Home Group as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, at Home Group produces a yield of 6.16%, which is high for Specialty Retail stocks.

Next Steps:

Keeping in mind the dividend characteristics above, at Home Group is definitely worth considering for investors looking to build a dedicated income portfolio. 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 important aspects you should further research:

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

2. Valuation: What is PETS 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 PETS 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 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.