A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Xenith IP Group Limited (ASX:XIP) has returned to shareholders over the past 2 years, an average dividend yield of 4.00% annually. Should it have a place in your portfolio? Let’s take a look at Xenith IP Group in more detail. See our latest analysis for Xenith IP Group
5 checks you should use to assess 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 dividend per share risen in the past couple of years?
- Is it able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does Xenith IP Group fit our criteria?The company currently pays out 125.90% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 72.45%, leading to a dividend yield of 8.63%. Furthermore, EPS should increase to A$0.11, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Xenith IP Group as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Xenith IP Group produces a yield of 5.20%, which is high for Professional Services stocks.
Taking all the above into account, Xenith IP Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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 pertinent aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for XIP’s future growth? Take a look at our free research report of analyst consensus for XIP’s outlook.
- Valuation: What is XIP 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 XIP 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.