Is Paragon Banking Group PLC (LON:PAG) 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. Paragon Banking Group PLC (LON:PAG) has returned to shareholders over the past 10 years, an average dividend yield of 3.00% annually. Should it have a place in your portfolio? Let’s take a look at Paragon Banking Group in more detail. Check out our latest analysis for Paragon Banking Group

5 checks you should use to assess a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is it paying an annual yield above 75% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

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

• Is its earnings sufficient to payout dividend at the current rate?

• Will it be able to continue to payout at the current rate in the future?

LSE:PAG Historical Dividend Yield June 26th 18

How well does Paragon Banking Group fit our criteria?

Paragon Banking Group has a trailing twelve-month payout ratio of 35.60%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 41.63%, leading to a dividend yield of 4.28%. Furthermore, EPS should increase to £0.49. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.

Compared to its peers, Paragon Banking Group has a yield of 3.23%, which is high for Mortgage stocks but still below the market’s top dividend payers.

Next Steps:

Keeping in mind the dividend characteristics above, Paragon Banking Group is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three important aspects you should look at:

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

2. Valuation: What is PAG 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 PAG 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.