A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Strabag SE (VIE:STR) has been paying a dividend to shareholders. Today it yields 4.4%. Let’s dig deeper into whether Strabag should have a place in your portfolio.
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- 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 it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does Strabag pass our checks?
Strabag has a trailing twelve-month payout ratio of 36%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect STR’s payout to increase to 48% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.9%. However, EPS is forecasted to fall to €3.01 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Compared to its peers, Strabag produces a yield of 4.4%, which is high for Construction stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Strabag 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. There are three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for STR’s future growth? Take a look at our free research report of analyst consensus for STR’s outlook.
- Valuation: What is STR 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 STR 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.