Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, James Fisher and Sons plc (LON:FSJ) has paid dividends to shareholders, and these days it yields 1.7%. Let’s dig deeper into whether James Fisher and Sons should have a place in your portfolio.

Check out our latest analysis for James Fisher and Sons

5 questions I ask before picking a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is their annual yield among the top 25% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share risen in the past couple of years?

• Is is able to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

Does James Fisher and Sons pass our checks?

James Fisher and Sons has a trailing twelve-month payout ratio of 34%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect FSJ’s payout to increase to 39% of its earnings, which leads to a dividend yield of around 2.1%. However, EPS is forecasted to fall to £0.86 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.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. FSJ has increased its DPS from £0.11 to £0.29 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, James Fisher and Sons generates a yield of 1.7%, which is on the low-side for Infrastructure stocks.

Next Steps:

Keeping in mind the dividend characteristics above, James Fisher and Sons is definitely worth considering for investors looking to build a dedicated income portfolio. 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. Below, I’ve compiled three relevant factors you should further research: