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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, Salisbury Bancorp, Inc. (NASDAQ:SAL) has paid dividends to shareholders, and these days it yields 2.6%. Should it have a place in your portfolio? Let’s take a look at Salisbury Bancorp in more detail.
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- 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?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Salisbury Bancorp pass our checks?
The company currently pays out 36% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 31% which, assuming the share price stays the same, leads to a dividend yield of 2.6%. However, EPS should increase to $3.3, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality facing SAL investors is that whilst it has continued to pay shareholders dividend, dividends are lower today, than they were a decade ago. Though this may not be a serious red flag, strong dividend stocks should always strive to increase its payout over time.
Compared to its peers, Salisbury Bancorp generates a yield of 2.6%, which is on the low-side for Banks stocks.
Considering the dividend attributes we analyzed above, Salisbury Bancorp 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 further examine:
- Future Outlook: What are well-informed industry analysts predicting for SAL’s future growth? Take a look at our free research report of analyst consensus for SAL’s outlook.
- Valuation: What is SAL 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 SAL 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.