Is Alliance Trust PLC (LON:ATST) A Smart Choice For Dividend Investors?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 10 years Alliance Trust PLC (LSE:ATST) has returned an average of 2.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Alliance Trust in more detail. View our latest analysis for Alliance Trust

5 questions I ask before picking a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

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

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Will it have the ability to keep paying its dividends going forward?

LSE:ATST Historical Dividend Yield May 25th 18

Does Alliance Trust pass our checks?

The company currently pays out 10.51% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although ATST’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time. Relative to peers, Alliance Trust produces a yield of 1.77%, which is on the low-side for Capital Markets stocks.

Next Steps:

Taking all the above into account, Alliance Trust is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. Below, I’ve compiled three important factors you should further research:

1. Valuation: What is ATST 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 ATST is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Alliance Trust’s board and the CEO’s back ground.

3. 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.