Yahoo Finance What To Know Before Buying Polypipe Group plc (LON:PLP) For Its Dividend
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the last few years Polypipe Group plc (LON:PLP) has paid a dividend to shareholders. Today it yields 3.2%. Should it have a place in your portfolio? Let’s take a look at Polypipe Group in more detail.
View our latest analysis for Polypipe Group
5 checks you should do on 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?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has it increased its dividend per share amount 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?
Does Polypipe Group pass our checks?
The company currently pays out 49% 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 lower payout ratio of 41%, leading to a dividend yield of around 3.6%. However, EPS should increase to £0.29, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Polypipe 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.
Relative to peers, Polypipe Group produces a yield of 3.2%, which is on the low-side for Building stocks.
Next Steps:
If you are building an income portfolio, then Polypipe Group is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 key aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for PLP’s future growth? Take a look at our free research report of analyst consensus for PLP’s outlook.
Valuation: What is PLP 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 PLP 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 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.
