Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 10 years, Livestock Improvement Corporation Limited (NZSE:LIC) has returned an average of 7.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Livestock Improvement should have a place in your portfolio. View out our latest analysis for Livestock Improvement
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 its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- 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 does Livestock Improvement fare?
The current trailing twelve-month payout ratio for the stock is 9.24%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from Livestock Improvement have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. 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, Livestock Improvement produces a yield of 2.34%, which is on the low-side for Food stocks.
Now you know to keep in mind the reason why investors should be careful investing in Livestock Improvement for the dividend. 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for LIC’s future growth? Take a look at our free research report of analyst consensus for LIC’s outlook.
- Valuation: What is LIC 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 LIC 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.