Should Infratil Limited (NZE:IFT) Be Part Of Your Dividend Portfolio?

A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Over the past 10 years, Infratil Limited (NZSE:IFT) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let's take a look at Infratil in more detail. Check out our latest analysis for Infratil

5 questions I ask before picking a dividend stock

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

• 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 the amount of dividend per share grown over the past?
• Is is able to pay the current rate of dividends from its earnings?
• Will it be able to continue to payout at the current rate in the future?

How does Infratil fare?

The company currently pays out 126.19% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a payout ratio of 118.79%, leading to a dividend yield of 5.46%. Moreover, EPS is forecasted to fall to NZ$0.11 in the upcoming year. 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. IFT has increased its DPS from NZ$0.06 to NZ$0.16 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 IFT a true dividend rockstar. In terms of its peers, Infratil generates a yield of 4.91%, which is on the low-side for Electric Utilities stocks.

Next Steps:

Taking all the above into account, Infratil is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 relevant aspects you should look at:

• 1. Future Outlook: What are well-informed industry analysts predicting for IFT’s future growth? Take a look at our free research report of analyst consensus for IFT’s outlook.
• 2. Valuation: What is IFT 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 IFT is currently mispriced by the market.
• 3. 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.