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, PGG Wrightson Limited (NZSE:PGW) has returned an average of 6.00% per year to shareholders in terms of dividend yield. Does PGG Wrightson tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for PGG Wrightson
Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does PGG Wrightson fit our criteria?
PGG Wrightson has a trailing twelve-month payout ratio of 62.78%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect PGW’s payout to increase to 74.30% of its earnings, which leads to a dividend yield of 5.77%. However, EPS is forecasted to fall to NZ$0.05 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. Dividend payments from PGG Wrightson have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends. Relative to peers, PGG Wrightson generates a yield of 5.52%, which is on the low-side for Food stocks.
If PGG Wrightson is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for PGW’s future growth? Take a look at our free research report of analyst consensus for PGW’s outlook.
- Historical Performance: What has PGW’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.