Have you been keeping an eye on GATX Corporation’s ( NYSE:GATX ) upcoming dividend of US$0.44 per share payable on the 30 September 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 13 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into GATX’s latest financial data to analyse its dividend attributes.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does GATX fit our criteria?
GATX has a trailing twelve-month payout ratio of 12.9%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect GATX’s payout to increase to 35.4% of its earnings, which leads to a dividend yield of around 2.2%. However, EPS is forecasted to fall to $5.01 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business . A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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. GATX has increased its DPS from $1.08 to $1.76 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, GATX produces a yield of 2.1%, which is on the low-side for Trade Distributors stocks.
Taking into account the dividend metrics, GATX ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 aspects you should look at:
- Future Outlook : What are well-informed industry analysts predicting for GATX’s future growth? Take a look at our free research report of analyst consensus for GATX’s outlook.
- Valuation : What is GATX 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 GATX is currently mispriced by the market.
- Other 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org .