Consider This Before Buying Sunrise Communications Group AG (VTX:SRCG) For The 5.0% Dividend
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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the last few years Sunrise Communications Group AG (VTX:SRCG) has paid a dividend to shareholders. Today it yields 5.0%. Let’s dig deeper into whether Sunrise Communications Group should have a place in your portfolio.
See our latest analysis for Sunrise Communications Group
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown 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 well does Sunrise Communications Group fit our criteria?
The company currently pays out 188% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a lower payout ratio of 146% which, assuming the share price stays the same, leads to a dividend yield of 5.6%. However, EPS should increase to CHF2.19, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. 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. The reality is that it is too early to consider Sunrise Communications Group as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Sunrise Communications Group generates a yield of 5.0%, which is high for Telecom stocks.
Next Steps:
After digging a little deeper into Sunrise Communications Group’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. Below, I’ve compiled three relevant factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for SRCG’s future growth? Take a look at our free research report of analyst consensus for SRCG’s outlook.
Valuation: What is SRCG 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 SRCG 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. On rare occasion, data errors may occur. Thank you for reading.
