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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the past 10 years Gentex Corporation (NASDAQ:GNTX) has returned an average of 2.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Gentex in more detail. Check out our latest analysis for Gentex
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is their annual yield among the top 25% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has the amount of dividend per share grown over the past?
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Can it afford to pay the current rate of dividends from its earnings?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Gentex fit our criteria?
Gentex has a trailing twelve-month payout ratio of 27.57%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward. 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 GNTX it has increased its DPS from $0.21 to $0.44 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. These are all positive signs of a great, reliable dividend stock. Relative to peers, Gentex produces a yield of 1.76%, which is on the low-side for Auto Components stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Gentex 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 fundamental aspects you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for GNTX’s future growth? Take a look at our free research report of analyst consensus for GNTX’s outlook.
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Valuation: What is GNTX 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 GNTX is currently mispriced by the market.
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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.