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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 6 years, The Star Entertainment Group Limited (ASX:SGR) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Star Entertainment Group in more detail. See our latest analysis for Star Entertainment Group
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
How does Star Entertainment Group fare?
Star Entertainment Group has a trailing twelve-month payout ratio of 84.86%, which means that the dividend is covered by earnings. However, going forward, analysts expect SGR’s payout to fall to 54.56% of its earnings, which leads to a dividend yield of around 3.19%. However, EPS should increase to A$0.27, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. The reality is that it is too early to consider Star Entertainment Group as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. In terms of its peers, Star Entertainment Group has a yield of 2.93%, which is on the low-side for Hospitality stocks.
Next Steps:
Taking all the above into account, Star Entertainment Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. I’ve put together three key factors you should further research:
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Future Outlook: What are well-informed industry analysts predicting for SGR’s future growth? Take a look at our free research report of analyst consensus for SGR’s outlook.
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Valuation: What is SGR 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 SGR is currently mispriced by the market.
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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.