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UFS is Currently a Strong Dividend Investment

$UFS is a good dividend investment


Domtar Corp. engages in the design, manufacturing, marketing, and distribution of fiber-based products, which includes communication papers, specialty and packaging papers and absorbent hygiene products. It operates through the following segments: Pulp and Paper, and Personal Care. The Pulp and Paper segment is involved in the design, manufacturing, marketing, and distribution of communication, specialty and packaging papers, as well as softwood, fluff, and hardwood market pulp. The Personal Care segment consists of the design, manufacturing, marketing, and distribution of absorbent hygiene products. The company was founded on March 7, 2007 and is headquartered in Fort Mill, SC.

Founded: 2007

Number of Employees: 10,000

Analysis Framework

We looked for industrial stocks with a dividend yield between 3.69% and 9.6% and found 70.  Out of that 70 we removed any that had not increased their dividend each year for the past five years.  That left a portfolio of 21 stocks.  We then ran three analyses on the group: dividend coverage, value and total dividend return.

Results

Dividend Coverage

We were looking for dividends to be less than 75% of free cash flow.  UFS was technically the only one that qualified, although TCP was close at 76%.

Value

There are many ways we could look at value, but since this is a dividend analysis, we'll consider a stock to be relatively undervalued if its forward dividend yield is higher than the average of the past five years.

UFS  has a forward dividend yield 28% higher than its average.  With a forward yield of 5.21%, it's also currently above highest dividend yield for the past five years.

Total Return

This number is an estimate comprised of the sum of the forward dividend yield and the 5 year historical dividend growth rate.

UFS has an appealing total return of 16%.

Conclusion

We like UFS as a dividend investment.  Although the initial cutoff for the portfolio was 5 years of year over year dividend growth, UFS has actually had 10 years.

Disclaimer

Whether or not this stock is appropriate for your portfolio, risk profile and long-term goals is not part of this evaluation.  The consequences of your investment decisions are yours and yours alone.  INVRS, its parent company, directors, officers and employees cannot be held responsible for any investment decisions you make.
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