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Should The Colonial Motor Company Limited (NZE:CMO) Be Part Of Your Portfolio?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. The Colonial Motor Company Limited (NZSE:CMO) has returned to shareholders over the past 10 years, an average dividend yield of 6.00% annually. Does Colonial Motor tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Colonial Motor

Here’s how I find good dividend stocks

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?

  • Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

  • Has it increased its dividend per share amount over the past?

  • Is its earnings sufficient to payout dividend at the current rate?

  • Will it have the ability to keep paying its dividends going forward?

NZSE:CMO Historical Dividend Yield May 24th 18
NZSE:CMO Historical Dividend Yield May 24th 18

How well does Colonial Motor fit our criteria?

Colonial Motor has a trailing twelve-month payout ratio of 62.14%, 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. 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. Although CMO’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time. Relative to peers, Colonial Motor generates a yield of 5.71%, which is on the low-side for Specialty Retail stocks.

Next Steps:

Whilst there are few things you may like about Colonial Motor from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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 relevant aspects you should further examine:

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  1. Historical Performance: What has CMO’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Colonial Motor’s board and the CEO’s back ground.

  3. 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.