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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. Historically, South Port New Zealand Limited (NZSE:SPN) has been paying a dividend to shareholders. Today it yields 3.9%. Let’s dig deeper into whether South Port New Zealand should have a place in your portfolio.
See our latest analysis for South Port New Zealand
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5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is it the top 25% annual dividend yield payer?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has the amount of dividend per share grown over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it have the ability to keep paying its dividends going forward?
How does South Port New Zealand fare?
The current trailing twelve-month payout ratio for the stock is 71%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. SPN has increased its DPS from NZ$0.095 to NZ$0.26 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 SPN a true dividend rockstar.
In terms of its peers, South Port New Zealand has a yield of 3.9%, which is on the low-side for Infrastructure stocks.
Next Steps:
With this in mind, I definitely rank South Port New Zealand 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant factors you should further examine: