Yahoo Finance What To Know Before Buying WestRock Company (NYSE:WRK) For Its Dividend
There is a lot to be liked about WestRock Company (NYSE:WRK) as an income stock, over the past 10 years it has returned an average of 2.0% per year. The company currently pays out a dividend yield of 3.1% to shareholders, making it a relatively attractive dividend stock. Does WestRock tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for WestRock
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it the top 25% annual dividend yield payer?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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?
How well does WestRock fit our criteria?
The company currently pays out 23.7% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect WRK’s payout to increase to 41.0% of its earnings, which leads to a dividend yield of around 3.4%. However, EPS is forecasted to fall to $5.32 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of WRK it has increased its DPS from $0.20 to $1.72 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes WRK a true dividend rockstar.
In terms of its peers, WestRock generates a yield of 3.1%, which is high for Packaging stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank WestRock as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 key aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for WRK’s future growth? Take a look at our free research report of analyst consensus for WRK’s outlook.
Valuation: What is WRK 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 WRK 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 editorial-team@simplywallst.com.
