Over the past 10 years Intact Financial Corporation (TSX:IFC) has returned an average of 2.84% per year from dividend payouts. Intact Financial Corporation, through its subsidiaries, provides property and casualty insurance products to individuals and businesses in Canada and is run by Charles Brindamour. Does it tick all the boxes of a great dividend stock? I’ll look into that.
5 Questions to Ask Before Picking a Dividend Stock
Whenever I am looking at a potential dividend stock investment, I always check these 5 metrics:
- Annual yield among the top 25% of dividend payers;
- Have they missed a payment in the past 10 years, or did the company significantly cut its dividend payout?
- Have they increased their dividend per share amount over at least 10 years?
- Able to pay the current rate with their earnings
- Do I believe the company can afford to keep paying based on future earnings growth?
If a stock has been paying dividends for less than 10 years It doesn’t yet pass my criteria of a ‘pure dividend stock’. Instead, I would consider the dividend as part of a value or growth analysis on the stock. Check out our latest analysis for Intact Financial
How does Intact Financial fare?
The current payout ratio for the stock is 62%, meaning the dividend is sufficiently covered by earnings. Looking forward 3 years the analysts expect the dividends per share to be around $2.987 and EPS to increase to $8.07. This means they should be able to continue the dividend payout with an estimated future payout ratio of 37%.
If there’s one type of stock you want to be reliable, it’s dividend stocks. In the case of IFC they have increased their DPS from $1.08 to $2.56 in the past 11 years. They have also been paying out consistently during this time, as one would expect if dividends were increasing.
As a result, IFC does pretty good with yield of 2.69%, which is high for a insurance stock but still below the market’s top dividend payers.
The Take Away
With this in mind, I definitely rank Intact Financial as a strong income stock, and it is worth further research for anyone who considers dividends an important part of their portfolio strategy. Despite the above criteria being relatively basic, it’s important that potential dividend stocks be checked against them, as they are fundamental checks for any serious income investor. On top of this, you should also be confident about the company’s core business and fundamentals.
No matter how great a company is, it is not worth an infinite price. Is Intact Financial overvalued or is it actually available for a good price? I recommend you check our latest FREE analysis to find out! If you are not interested in IFC anymore check out my list of “Dividend Rock Stars” to see stocks that meet all the checks above.