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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 10 years, Codan Limited (ASX:CDA) has returned an average of 6.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Codan in more detail. View our latest analysis for Codan
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share amount increased over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Codan pass our checks?
The company currently pays out 28.51% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CDA’s payout to increase to 51.81% of its earnings, which leads to a dividend yield of around 4.09%. However, EPS is forecasted to fall to A$0.18 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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. Compared to its peers, Codan produces a yield of 3.18%, which is high for Electronic stocks but still below the market’s top dividend payers.
Next Steps:
With this in mind, I definitely rank Codan 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental aspects you should further research:
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1. Future Outlook: What are well-informed industry analysts predicting for CDA’s future growth? Take a look at our free research report of analyst consensus for CDA’s outlook.
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2. Valuation: What is CDA 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 CDA is currently mispriced by the market.
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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.