Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 3 years Sandfire Resources NL (ASX:SFR) has returned an average of 2.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Sandfire Resources in more detail. View our latest analysis for Sandfire Resources
5 checks you should use to assess 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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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has dividend per share amount increased over the past?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
Does Sandfire Resources pass our checks?
The current payout ratio for the stock is 36.61%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 31.91%, leading to a dividend yield of around 4.00%. However, EPS should increase to A$0.66, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Sandfire Resources as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Sandfire Resources has a yield of 2.51%, which is on the low-side for metals and mining stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Sandfire Resources 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important aspects you should further research:
1. Future Outlook: What are well-informed industry analysts predicting for SFR’s future growth? Take a look at our free research report of analyst consensus for SFR’s outlook.