A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Palfinger AG (VIE:PAL) has paid dividends to shareholders, and these days it yields 2.0%. Does Palfinger tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
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:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Palfinger fare?
The current trailing twelve-month payout ratio for the stock is 33%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect PAL’s payout to remain around the same level at 33% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.2%. In addition to this, EPS should increase to €2.14.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider 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.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although PAL’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, Palfinger produces a yield of 2.0%, which is on the low-side for Machinery stocks.
With this in mind, I definitely rank Palfinger as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for PAL’s future growth? Take a look at our free research report of analyst consensus for PAL’s outlook.
- Valuation: What is PAL 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 PAL 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.
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 email@example.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. Thank you for reading.