Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. PACCAR Inc (NASDAQ:PCAR) has returned to shareholders over the past 10 years, an average dividend yield of 3.00% annually. Does PACCAR tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- 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 PACCAR fare?
PACCAR has a trailing twelve-month payout ratio of 17.57%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 45.07%, leading to a dividend yield of 3.71%. Moreover, EPS should increase to $6.05. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors 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 PCAR’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, PACCAR generates a yield of 3.51%, which is high for Machinery stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, PACCAR ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PCAR’s future growth? Take a look at our free research report of analyst consensus for PCAR’s outlook.
- Valuation: What is PCAR 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 PCAR 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.