Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 10 years Navigator Global Investments Limited (ASX:NGI) has returned an average of 7.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Navigator Global Investments in more detail. See our latest analysis for Navigator Global Investments
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 it paying an annual yield above 75% 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 the amount of dividend per share grown over the past?
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Does earnings amply cover its dividend payments?
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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 Navigator Global Investments fit our criteria?
Navigator Global Investments has a payout ratio of 128.38%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 73.10%, leading to a dividend yield of 6.30%. Furthermore, EPS should increase to $0.17, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. Not only have dividend payouts from Navigator Global Investments fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Compared to its peers, Navigator Global Investments has a yield of 3.67%, which is on the low-side for capital markets stocks.
Next Steps:
After digging a little deeper into Navigator Global Investments’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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 pertinent factors you should further research: