Yahoo Finance Is McCarthy & Stone plc (LON:MCS) An Attractive Dividend Stock?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. McCarthy & Stone plc (LON:MCS) has recently paid dividends to shareholders, and currently yields 3.9%. Should it have a place in your portfolio? Let’s take a look at McCarthy & Stone in more detail.
Check out our latest analysis for McCarthy & Stone
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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?
How does McCarthy & Stone fare?
The company currently pays out 46% 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 47%, leading to a dividend yield of around 3.5%. Furthermore, EPS is forecasted to fall to £0.093 in the upcoming year.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. Unfortunately, it is really too early to view McCarthy & Stone as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, McCarthy & Stone produces a yield of 3.9%, which is on the low-side for Consumer Durables stocks.
Next Steps:
Taking all the above into account, McCarthy & Stone is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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 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 essential aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for MCS’s future growth? Take a look at our free research report of analyst consensus for MCS’s outlook.
Valuation: What is MCS 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 MCS 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.
