Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 4 years, Westlake Chemical Partners LP (NYSE:WLKP) has returned an average of 6.00% per year to shareholders in terms of dividend yield. Does Westlake Chemical Partners tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View out our latest analysis for Westlake Chemical Partners
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- 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 Westlake Chemical Partners fare?
Westlake Chemical Partners has a trailing twelve-month payout ratio of 72.74%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 96.24%, leading to a dividend yield of around 7.25%. However, EPS is forecasted to fall to $2.02 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Westlake Chemical Partners 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.Compared to its peers, Westlake Chemical Partners generates a yield of 6.40%, which is high for Chemicals stocks.
If Westlake Chemical Partners is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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, 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. Below, I’ve compiled three relevant aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for WLKP’s future growth? Take a look at our free research report of analyst consensus for WLKP’s outlook.
- Valuation: What is WLKP 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 WLKP 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.