A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, NewMarket Corporation ( NYSE:NEU ) has paid dividends to shareholders, and these days it yields 1.8%. Does NewMarket tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is is able 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?
Does NewMarket pass our checks?
The company currently pays out 47% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is 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.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business . A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of NEU it has increased its DPS from $0.80 to $7 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 NEU a true dividend rockstar.
Compared to its peers, NewMarket produces a yield of 1.8%, which is on the low-side for Chemicals stocks.
Considering the dividend attributes we analyzed above, NewMarket 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three essential factors you should look at:
- Future Outlook : What are well-informed industry analysts predicting for NEU’s future growth? Take a look at our free research report of analyst consensus for NEU’s outlook.
- Valuation : What is NEU 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 NEU 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 .