Is Bumitama Agri Ltd (SGX:P8Z) A Great Dividend Stock?

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 5 years, Bumitama Agri Ltd (SGX:P8Z) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Bumitama Agri in more detail. View our latest analysis for Bumitama Agri

Here’s how I find good dividend stocks

When researching a dividend stock, I always follow the following screening criteria:

• 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 risen in the past couple of years?

• Can it afford 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?

SGX:P8Z Historical Dividend Yield Jun 2nd 18

How does Bumitama Agri fare?

The company currently pays out 42.56% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect P8Z’s payout to fall to 23.91% of its earnings, which leads to a dividend yield of around 2.67%. However, EPS should increase to IDR733.07, 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. Unfortunately, it is really too early to view Bumitama Agri as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Bumitama Agri has a yield of 3.93%, which is high for Food stocks but still below the market’s top dividend payers.

Next Steps:

Taking all the above into account, Bumitama Agri 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 fundamental factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for P8Z’s future growth? Take a look at our free research report of analyst consensus for P8Z’s outlook.

2. Valuation: What is P8Z 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 P8Z is currently mispriced by the market.

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.