Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 10 years American Railcar Industries Inc (NASDAQ:ARII) has returned an average of 2.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at American Railcar Industries in more detail.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% 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?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How does American Railcar Industries fare?
The current trailing twelve-month payout ratio for the stock is 21.12%, 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 is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although ARII’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.Compared to its peers, American Railcar Industries generates a yield of 3.87%, which is high for Machinery stocks but still below the market’s top dividend payers.
If you are building an income portfolio, then American Railcar Industries is a complicated choice since it has some positive aspects as well as negative ones. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three important aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for ARII’s future growth? Take a look at our free research report of analyst consensus for ARII’s outlook.
- Valuation: What is ARII 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 ARII 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.