A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. In the past 10 years Navitas Limited (ASX:NVT) has returned an average of 4.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Navitas should have a place in your portfolio. View our latest analysis for Navitas
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Navitas fit our criteria?The current trailing twelve-month payout ratio for NVT is 135.31%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect NVT’s payout to fall into a more sustainable range of 84.52% of its earnings, which leads to a dividend yield of 4.42%. Moreover, EPS should increase to A$0.21, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of NVT it has increased its DPS from A$0.1 to A$0.2 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes NVT a true dividend rockstar. Relative to peers, Navitas generates a yield of 4.37%, which is high for Consumer Services stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Navitas as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NVT’s future growth? Take a look at our free research report of analyst consensus for NVT’s outlook.
- Valuation: What is NVT 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 NVT is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.