Tate & Lyle plc (LON:TATE) has pleased shareholders over the past 10 years, by paying out dividends. The stock currently pays out a dividend yield of 4.2%, and has a market cap of UK£3.1b. Let’s dig deeper into whether Tate & Lyle should have a place in your portfolio.
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Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- 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 have the ability to keep paying its dividends going forward?
How well does Tate & Lyle fit our criteria?
Tate & Lyle has a trailing twelve-month payout ratio of 61%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 58% which, assuming the share price stays the same, leads to a dividend yield of 4.4%. Moreover, EPS should increase to £0.49.
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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of TATE it has increased its DPS from £0.23 to £0.29 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes TATE a true dividend rockstar.
Relative to peers, Tate & Lyle generates a yield of 4.2%, which is high for Food stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Tate & Lyle is definitely worth keeping an eye on for someone 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. I’ve put together three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for TATE’s future growth? Take a look at our free research report of analyst consensus for TATE’s outlook.
- Valuation: What is TATE 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 TATE is currently mispriced by the market.
- 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 email@example.com.