Should British & American Investment Trust plc (LON:BAF) Be Part Of Your Dividend Portfolio?

By
Simply Wall St
Published
May 18, 2018
LSE:BAF

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 10 years British & American Investment Trust plc (LSE:BAF) has returned an average of 10.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let's take a look at British & American Investment Trust in more detail. See our latest analysis for British & American Investment Trust

Here's how I find good dividend stocks

When researching a dividend stock, I always follow the following screening criteria:

  • 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 it increased its dividend per share amount over the past?
  • Can it afford to pay the current rate of dividends from its earnings?
  • Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

LSE:BAF Historical Dividend Yield May 18th 18
LSE:BAF Historical Dividend Yield May 18th 18

How well does British & American Investment Trust fit our criteria?

British & American Investment Trust has a negative payout ratio, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. In the case of BAF it has increased its DPS from £0.06 to £0.09 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 BAF a true dividend rockstar. Compared to its peers, British & American Investment Trust produces a yield of 11.47%, which is high for Capital Markets stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank British & American Investment Trust 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 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 aspects you should further examine:

  1. Historical Performance: What has BAF'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.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on British & American Investment Trust’s board and the CEO’s back ground.
  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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Simply Wall St has no position in any of the companies mentioned. This article is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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