A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. In the past 2 years P&F Industries Inc (NASDAQ:PFIN) has returned an average of 3.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at P&F Industries in more detail.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does P&F Industries pass our checks?
P&F Industries has a negative payout ratio, which means that it is loss-making, and paying its dividend from its retained earnings.
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. The reality is that it is too early to consider P&F Industries as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, P&F Industries generates a yield of 2.36%, which is on the low-side for Consumer Durables stocks.
After digging a little deeper into P&F Industries’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. There are three pertinent aspects you should look at:
- Valuation: What is PFIN 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 PFIN is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on P&F Industries’s board and the CEO’s back ground.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.