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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, MutualFirst Financial, Inc. (NASDAQ:MFSF) has paid a dividend to shareholders. It currently yields 2.7%. Should it have a place in your portfolio? Let’s take a look at MutualFirst Financial in more detail.
How I analyze 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 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?
- Is is able 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 well does MutualFirst Financial fit our criteria?
MutualFirst Financial has a trailing twelve-month payout ratio of 33%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect MFSF’s payout to remain around the same level at 31% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.9%. Moreover, EPS should increase to $2.63.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, MutualFirst Financial generates a yield of 2.7%, which is on the low-side for Banks stocks.
With this in mind, I definitely rank MutualFirst Financial as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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. Below, I’ve compiled three pertinent factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for MFSF’s future growth? Take a look at our free research report of analyst consensus for MFSF’s outlook.
- Valuation: What is MFSF 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 MFSF is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.