In This Article:
There is a lot to be liked about Challenger Limited (ASX:CGF) as an income stock, over the past 10 years it has returned an average of 4.00% per year. The company is currently worth AU$6.94B, and now yields roughly 3.04%. Should it have a place in your portfolio? Let’s take a look at Challenger in more detail. View our latest analysis for Challenger
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is its annual yield among the top 25% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share risen in the past couple of years?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it be able to continue to payout at the current rate in the future?
How does Challenger fare?
The current trailing twelve-month payout ratio for the stock is 51.55%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 52.70%, leading to a dividend yield of around 3.42%. In addition to this, EPS is forecasted to fall to A$0.68 in the upcoming year. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. CGF has increased its DPS from A$0.13 to A$0.35 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes CGF a true dividend rockstar. Relative to peers, Challenger has a yield of 3.04%, which is on the low-side for Diversified Financial stocks.
Next Steps:
Taking into account the dividend metrics, Challenger ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three fundamental aspects you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for CGF’s future growth? Take a look at our free research report of analyst consensus for CGF’s outlook.
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Valuation: What is CGF 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 CGF 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.