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On the 24 May 2019, CIT Group Inc. (NYSE:CIT) will be paying shareholders an upcoming dividend amount of US$0.35 per share. However, investors must have bought the company’s stock before 09 May 2019 in order to qualify for the payment. That means you have only 2 days left! Should you diversify into CIT Group and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown 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 well does CIT Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 26%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 28% which, assuming the share price stays the same, leads to a dividend yield of 2.8%. Furthermore, EPS should increase to $5.02. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. Unfortunately, it is really too early to view CIT Group as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, CIT Group has a yield of 2.6%, which is on the low-side for Banks stocks.
If you are building an income portfolio, then CIT Group is a complicated choice since it has some positive aspects as well as negative ones. 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 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 fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CIT’s future growth? Take a look at our free research report of analyst consensus for CIT’s outlook.
- Valuation: What is CIT 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 CIT 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.
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.