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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, CVR Energy, Inc. (NYSE:CVI) has been paying a dividend to shareholders. Today it yields 7.2%. Let’s dig deeper into whether CVR Energy should have a place in your portfolio.
Check out our latest analysis for CVR Energy
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased 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?
Does CVR Energy pass our checks?
The company currently pays out 55% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 121% which, assuming the share price stays the same, leads to a dividend yield of around 8.5%.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider CVR Energy as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, CVR Energy has a yield of 7.2%, which is high for Oil and Gas stocks.
Next Steps:
If CVR Energy is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CVI’s future growth? Take a look at our free research report of analyst consensus for CVI’s outlook.
- Valuation: What is CVI 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 CVI 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.
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 editorial-team@simplywallst.com.