There is a lot to be liked about Stagecoach Group plc (LON:SGC) as an income stock, over the past 10 years it has returned an average of 4.00% per year. The stock currently pays out a dividend yield of 8.94%, and has a market cap of UK£762.71m. Does Stagecoach Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Stagecoach Group
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- 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?
How does Stagecoach Group fare?
The company currently pays out 184.95% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect SGC’s payout to fall into a more sustainable range of 70.52% of its earnings, which leads to a dividend yield of 8.07%. Moreover, EPS should increase to £0.17, 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. SGC has increased its DPS from £0.068 to £0.12 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Stagecoach Group produces a yield of 8.94%, which is high for Transportation stocks.
With these dividend metrics in mind, I definitely rank Stagecoach Group as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. There are three relevant aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for SGC’s future growth? Take a look at our free research report of analyst consensus for SGC’s outlook.
- Valuation: What is SGC 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 SGC is currently mispriced by the market.
- 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.