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 4 years Frasers Property Limited (SGX:TQ5) has returned an average of 4.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Frasers Property in more detail. Check out our latest analysis for Frasers Property

How I analyze a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is their annual yield among the top 25% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Is is able to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

How does Frasers Property fare?

Frasers Property has a trailing twelve-month payout ratio of 44.17%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 51.10%, leading to a dividend yield of around 4.84%. However, EPS is forecasted to fall to SGD0.19 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Frasers Property as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Frasers Property has a yield of 4.97%, which is high for Real Estate stocks but still below the market’s top dividend payers.

Next Steps:

Whilst there are few things you may like about Frasers Property from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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. Below, I’ve compiled three important factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for TQ5’s future growth? Take a look at our free research report of analyst consensus for TQ5’s outlook.

2. Valuation: What is TQ5 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 TQ5 is currently mispriced by the market.

3. 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.