Should Keppel Corporation Limited (SGX:BN4) Be Part Of Your Dividend Portfolio?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the past 10 years Keppel Corporation Limited (SGX:BN4) has returned an average of 4.00% per year to investors in the form of dividend payouts. Does Keppel tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Keppel
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share amount increased over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
How does Keppel fare?
Keppel has a trailing twelve-month payout ratio of 132.49%, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect BN4’s payout to fall into a more sustainable range of 46.21% of its earnings, which leads to a dividend yield of 3.68%. Moreover, EPS should increase to SGD0.57, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time. Relative to peers, Keppel produces a yield of 2.90%, which is high for Industrials stocks but still below the market’s top dividend payers.
Next Steps:
If you are building an income portfolio, then Keppel is a complicated choice since it has some positive aspects as well as negative ones. 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. I’ve put together three key factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for BN4’s future growth? Take a look at our free research report of analyst consensus for BN4’s outlook.
Valuation: What is BN4 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 BN4 is currently mispriced by the market.
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.
