Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Cpl Resources plc (ISE:DQ5) has been paying a dividend to shareholders. Today it yields 2.3%. Should it have a place in your portfolio? Let's take a look at Cpl Resources in more detail.
View our latest analysis for Cpl Resources
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does Cpl Resources fit our criteria?
The current trailing twelve-month payout ratio for the stock is 23%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect DQ5's payout to remain around the same level at 23% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.4%. Moreover, EPS should increase to €0.67.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Although DQ5'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, Cpl Resources generates a yield of 2.3%, which is on the low-side for Professional Services stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Cpl Resources is definitely worth considering for investors looking to build a dedicated income portfolio. 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 key aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for DQ5’s future growth? Take a look at our free research report of analyst consensus for DQ5’s outlook.
- Valuation: What is DQ5 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 DQ5 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.