Yahoo Finance Why Babcock International Group PLC (LON:BAB) Should Be In Your Portfolio
Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!
Over the past 10 years Babcock International Group PLC (LON:BAB) has been paying dividends to shareholders. The company currently pays out a dividend yield of 5.8% to shareholders, making it a relatively attractive dividend stock. Does Babcock International Group tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
View our latest analysis for Babcock International Group
How I analyze 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?
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?
Will it be able to continue to payout at the current rate in the future?
How well does Babcock International Group fit our criteria?
The company currently pays out 62% 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 lower payout ratio of 38% which, assuming the share price stays the same, leads to a dividend yield of 6.0%. However, EPS should increase to £0.55, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. BAB has increased its DPS from £0.14 to £0.29 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes BAB a true dividend rockstar.
Compared to its peers, Babcock International Group has a yield of 5.8%, which is high for Commercial Services stocks.
Next Steps:
With this in mind, I definitely rank Babcock International Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three important factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for BAB’s future growth? Take a look at our free research report of analyst consensus for BAB’s outlook.
Valuation: What is BAB 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 BAB 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
