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Does Vail Resorts, Inc. (NYSE:MTN) Have A Place In Your Portfolio?

Kyle Sanford

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Vail Resorts, Inc. (NYSE:MTN) has paid dividends to shareholders, and these days it yields 2.8%. Should it have a place in your portfolio? Let’s take a look at Vail Resorts in more detail.

View our latest analysis for Vail Resorts

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

  • Is it paying an annual yield above 75% of dividend payers?
  • 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 be able to continue to payout at the current rate in the future?
NYSE:MTN Historical Dividend Yield January 1st 19

How does Vail Resorts fare?

The company currently pays out 79% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect MTN’s payout to remain around the same level at 86% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.7%. In addition to this, EPS should increase to $8.01.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

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. The reality is that it is too early to consider Vail Resorts as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, Vail Resorts produces a yield of 2.8%, which is on the low-side for Hospitality stocks.

Next Steps:

If you are building an income portfolio, then Vail Resorts is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. Below, I’ve compiled three important factors you should look at:

  1. Future Outlook: What are well-informed industry analysts predicting for MTN’s future growth? Take a look at our free research report of analyst consensus for MTN’s outlook.
  2. Valuation: What is MTN 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 MTN is currently mispriced by the market.
  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

