Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years Central Securities Corp (NYSEMKT:CET) has returned an average of 7.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Central Securities should have a place in your portfolio. View out our latest analysis for Central Securities
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How does Central Securities fare?
The company currently pays out 14.86% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Dividend payments from Central Securities have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.Relative to peers, Central Securities generates a yield of 3.80%, which is high for Capital Markets stocks but still below the market’s top dividend payers.
After digging a little deeper into Central Securities’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CET’s future growth? Take a look at our free research report of analyst consensus for CET’s outlook.
- Historical Performance: What has CET’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.