Why Pennon Group Plc (LON:PNN) Should Be In Your Portfolio

Over the past 10 years Pennon Group Plc (LSE:PNN) has returned an average of 4.00% per year from dividend payouts. The stock currently pays out a dividend yield of 5.49%, and has a market cap of UK£2.76B. Should it have a place in your portfolio? Let's take a look at Pennon Group in more detail. See our latest analysis for Pennon Group

Here's how I find good dividend stocks

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is it the top 25% annual dividend yield payer?
• 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?

Does Pennon Group pass our checks?

Pennon Group has a trailing twelve-month payout ratio of 83.88%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 76.30%, leading to a dividend yield of 6.31%. Moreover, EPS should increase to £0.47. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. PNN has increased its DPS from £0.19 to £0.36 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes PNN a true dividend rockstar. Relative to peers, Pennon Group generates a yield of 5.49%, which is high for Water Utilities stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Pennon Group is definitely worth keeping an eye on for someone looking to build a dedicated income 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. I've put together three key aspects you should look at:

• 1. Future Outlook: What are well-informed industry analysts predicting for PNN’s future growth? Take a look at our free research report of analyst consensus for PNN’s outlook.
• 2. Valuation: What is PNN 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 PNN 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.