Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. CI Financial Corp (TSX:CIX) has returned to shareholders over the past 10 years, an average dividend yield of 5.00% annually. Does CI Financial tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for CI Financial
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does CI Financial pass our checks?
The current trailing twelve-month payout ratio for the stock is 74.24%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect CIX’s payout to fall to 58.16% of its earnings, which leads to a dividend yield of 5.19%. However, EPS should increase to CA$2.31, 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. Not only have dividend payouts from CI Financial fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Compared to its peers, CI Financial generates a yield of 4.98%, which is high for Capital Markets stocks.Next Steps:
With these dividend metrics in mind, I definitely rank CI Financial as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 fundamental aspects you should further research:
- 1. Future Outlook: What are well-informed industry analysts predicting for CIX’s future growth? Take a look at our free research report of analyst consensus for CIX’s outlook.
- 2. Valuation: What is CIX 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 CIX is currently mispriced by the market.
- 3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.