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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 6 years Chorus Limited (NZSE:CNU) has returned an average of 5.00% per year to investors in the form of dividend payouts. Does Chorus tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Chorus
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
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Is their 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 amount increased over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Will the company be able to keep paying dividend based on the future earnings growth?
How does Chorus fare?
Chorus has a trailing twelve-month payout ratio of 93.25%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a higher payout ratio of 145.33%, leading to a dividend yield of 5.74%. However, EPS is forecasted to fall to NZ$0.17 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Chorus 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. Compared to its peers, Chorus generates a yield of 5.40%, which is high for Telecom stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into Chorus’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 aspects you should further research:
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Future Outlook: What are well-informed industry analysts predicting for CNU’s future growth? Take a look at our free research report of analyst consensus for CNU’s outlook.
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Historical Performance: What has CNU’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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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.