Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 2 years, Gateway Lifestyle Group (ASX:GTY) has returned an average of 5.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Gateway Lifestyle Group in more detail. Check out our latest analysis for Gateway Lifestyle Group

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

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

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will the company be able to keep paying dividend based on the future earnings growth?

How well does Gateway Lifestyle Group fit our criteria?

The company currently pays out 46.53% 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 69.85%, leading to a dividend yield of around 5.65%. However, EPS is forecasted to fall to A$0.15 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Gateway Lifestyle Group as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. In terms of its peers, Gateway Lifestyle Group has a yield of 5.33%, which is high for Real Estate stocks.

Next Steps:

With this in mind, I definitely rank Gateway Lifestyle Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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. There are three relevant aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for GTY’s future growth? Take a look at our free research report of analyst consensus for GTY’s outlook.

2. Valuation: What is GTY 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 GTY is currently mispriced by the market.

3. 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 pass 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.