Over the past 10 years Spire Inc. (NYSE:SR) has been paying dividends to shareholders. The company is currently worth US$4.1b, 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.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 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?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does Spire fit our criteria?
The current trailing twelve-month payout ratio for the stock is 69%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SR’s payout to remain around the same level at 62% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.1%. In addition to this, EPS should increase to $3.8.
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.
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. SR has increased its DPS from $1.54 to $2.37 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 SR a true dividend rockstar.
Relative to peers, Spire produces a yield of 3.0%, which is high for Gas Utilities stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Spire is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three essential aspects you should further research:
- 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.
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 email@example.com. 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.