Yahoo Finance What To Know Before Buying Phillips 66 (NYSE:PSX) For Its Dividend
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 6 years Phillips 66 (NYSE:PSX) has returned an average of 3.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Phillips 66 should have a place in your portfolio. View out our latest analysis for Phillips 66
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is their annual yield among the top 25% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share amount increased over the past?
Is is 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?
How does Phillips 66 fare?
The company currently pays out 27.87% 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 higher payout ratio of 36.51%, leading to a dividend yield of around 2.91%. However, EPS is forecasted to fall to $7.84 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Phillips 66 as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Phillips 66 has a yield of 2.86%, which is on the low-side for Oil and Gas stocks.
Next Steps:
Whilst there are few things you may like about Phillips 66 from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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. Below, I’ve compiled three key aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for PSX’s future growth? Take a look at our free research report of analyst consensus for PSX’s outlook.
Valuation: What is PSX 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 PSX 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.
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.
