Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 4 years The Citadel Group Limited (ASX:CGL) 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 Citadel Group in more detail. View out our latest analysis for Citadel Group
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- 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 Citadel Group fit our criteria?
The company currently pays out 48.48% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CGL’s payout to increase to 55.60% of its earnings, which leads to a dividend yield of 2.63%. Furthermore, EPS should increase to A$0.31. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
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. The reality is that it is too early to consider Citadel Group as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Citadel Group generates a yield of 2.46%, which is high for IT stocks but still below the market’s top dividend payers.
Taking all the above into account, Citadel Group 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, 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. I’ve put together three pertinent factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CGL’s future growth? Take a look at our free research report of analyst consensus for CGL’s outlook.
- Valuation: What is CGL 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 CGL is currently mispriced by the market.
- 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.