There is a lot to be liked about Spire Inc. (NYSE:SR) as an income stock. It has paid dividends over the past 10 years. The company is currently worth US$4.0b, and now yields roughly 3.0%. Does Spire tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Spire
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased 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?
Does Spire pass our checks?
Spire has a trailing twelve-month payout ratio of 52%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 64% which, assuming the share price stays the same, leads to a dividend yield of around 3.1%. However, EPS is forecasted to fall to $3.74 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. In the case of SR it has increased its DPS from $1.54 to $2.37 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Spire generates a yield of 3.0%, which is high for Gas Utilities stocks but still below the market’s top dividend payers.
Next Steps:
Keeping in mind the dividend characteristics above, Spire is definitely worth considering for investors looking to build a dedicated income portfolio. 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 pertinent factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SR’s future growth? Take a look at our free research report of analyst consensus for SR’s outlook.
- Historical Performance: What has SR’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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 editorial-team@simplywallst.com.