How I Analyze a Dividend Stock
When researching a dividend stock, I always follow these screening criteria:
- Annual yield among the top 25% of dividend payers;
- Not missed a payment in the past 10 years, nor significantly reduced per share payout
- Have they increased their dividend per share amount over at least 10 years?
- Can they afford to pay the current rate with their earnings?
- Do I believe the company can afford to keep paying based on future earnings growth?
It’s probably also worth saying that if the company has been a dividend payer 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. View our latest analysis for Games Workshop Group
How does Games Workshop Group fare?
Games Workshop Group has a payout ratio of 78%, meaning the dividend is sufficiently covered by earnings. Looking forward 3 years the analysts expect the dividends per share to be around £0.818 and EPS to decrease to £0.95. This means they should be able to continue the dividend payout with an estimated future payout ratio of 86%.
Reliablity is an important factor for dividend stocks, particularly for more conservative income investors who want a strong track-record and positive outlook for future payout increases. The reality is that it is too early to consider Games Workshop Group as a dividend investment. They have only been consistently paying for 8 years and standard practice for reliable payers is to look for 10+ years track record. }
This means GAW scores well with yield of 7.15%, which is high for a consumer products stock.
Considering this, GAW is definitely worth considering for someone looking to build a dedicated income Portfolio. 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 Games Workshop Group 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 GAW anymore check out my list of “Dividend Rock Stars” to see stocks that meet all the checks above.