Over the past 10 years WestRock Company (NYSE:WRK) has grown its dividend payouts from $0.20 to $1.82. With a market cap of US$10b, WestRock pays out 23% of its earnings, leading to a 4.5% yield. Let me elaborate on you why the stock stands out for income investors like myself.
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What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- It is paying an annual yield above 75% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its has increased its dividend per share amount over the past
- It can afford to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
WestRock’s dividend yield stands at 4.5%, which is high for Packaging stocks. But the real reason WestRock stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of WRK it has increased its DPS from $0.20 to $1.82 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 WRK a true dividend rockstar.
WestRock has a trailing twelve-month payout ratio of 23%, which means that the dividend is covered by earnings. Going forward, analysts expect WRK’s payout to increase to 39% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.8%. However, EPS is forecasted to fall to $4.5 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
There aren’t many other stocks out there with the same track record as WestRock, so I would certainly recommend further examining the stock if its dividend characteristics appeal to you. However, given 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 relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for WRK’s future growth? Take a look at our free research report of analyst consensus for WRK’s outlook.
- Valuation: What is WRK 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 WRK is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better 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 email@example.com.