A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Deluxe Corporation ( NYSE:DLX ) has paid dividends to shareholders, and these days it yields 2.8%. Let’s dig deeper into whether Deluxe should have a place in your portfolio.
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Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% 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?
- Can it afford 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 does Deluxe fare?
Deluxe has a trailing twelve-month payout ratio of 32%, meaning the dividend is sufficiently 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 assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business . Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. In the case of DLX it has increased its DPS from $1 to $1.2 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 DLX a true dividend rockstar.
Relative to peers, Deluxe produces a yield of 2.8%, which is high for Commercial Services stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, Deluxe is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. I’ve put together three essential aspects you should further examine:
- Future Outlook : What are well-informed industry analysts predicting for DLX’s future growth? Take a look at our free research report of analyst consensus for DLX’s outlook.
- Valuation : What is DLX 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 DLX 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 email@example.com .