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Shares of GATX Corporation (NYSE:GATX) will begin trading ex-dividend in 3 days. To qualify for the dividend check of US$0.46 per share, investors must have owned the shares prior to 01 March 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. What does this mean for current shareholders and potential investors? Below, I will explain how holding GATX can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 questions to ask before buying 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?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown 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 does GATX fare?
The current trailing twelve-month payout ratio for the stock is 31%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 37% which, assuming the share price stays the same, leads to a dividend yield of around 2.4%. However, EPS is forecasted to fall to $5 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
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. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. GATX has increased its DPS from $1.12 to $1.84 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes GATX a true dividend rockstar.
In terms of its peers, GATX has a yield of 2.4%, which is on the low-side for Trade Distributors stocks.
Considering the dividend attributes we analyzed above, GATX is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for GATX’s future growth? Take a look at our free research report of analyst consensus for GATX’s outlook.
- Valuation: What is GATX 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 GATX 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 firstname.lastname@example.org. 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.