What To Know Before Buying DCC plc (LON:DCC) For Its Dividend

Over the past 10 years DCC plc (LSE:DCC) has returned an average of 3.00% per year from dividend payouts. The company is currently worth UK£6.46B, and now yields roughly 1.70%. Does DCC tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for DCC

5 questions I ask before picking a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• Does it consistently pay out dividends without missing a payment or significantly cutting payout?

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

• Is it able 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:DCC Historical Dividend Yield May 28th 18

How well does DCC fit our criteria?

DCC has a trailing twelve-month payout ratio of 47.40%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 38.96%, leading to a dividend yield of 2.00%. However, EPS should increase to £3.28, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. DCC has increased its DPS from £0.44 to £1.23 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes DCC a true dividend rockstar. Relative to peers, DCC produces a yield of 1.70%, which is on the low-side for Industrials stocks.

Next Steps:

With this in mind, I definitely rank DCC as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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. I’ve put together three relevant factors you should further research:

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

2. Valuation: What is DCC 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 DCC 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.