Should The Unite Group plc (LON:UTG) Be Part Of Your Dividend Portfolio?

A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. In the past 10 years The Unite Group plc (LON:UTG) has returned an average of 1.00% per year to investors in the form of dividend payouts. Does Unite Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Unite Group

5 questions to ask before buying a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it the top 25% annual dividend yield payer?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share amount increased over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

LSE:UTG Historical Dividend Yield June 27th 18

Does Unite Group pass our checks?

Unite Group has a trailing twelve-month payout ratio of 23.82%, which is rather low compared to other REITs. Generally, REITs are expected to pay out the majority of its earnings to provide a regular income stream for their investors. In the near future, analysts are predicting a higher payout ratio of 83.43%, leading to a dividend yield of around 3.77%. However, EPS is forecasted to fall to £0.74 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

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. 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.

In terms of its peers, Unite Group generates a yield of 2.68%, which is on the low-side for REITs stocks.

Next Steps:

Taking into account the dividend metrics, Unite Group ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. Below, I’ve compiled three key aspects you should further research:

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

2. Valuation: What is UTG 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 UTG 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.