Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Metall Zug AG (VTX:METN) has paid a dividend to shareholders. It currently yields 2.5%. Does Metall Zug tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
Does Metall Zug pass our checks?
The current trailing twelve-month payout ratio for the stock is 46%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect METN’s payout to fall to 40% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.9%. However, EPS should increase to CHF164.78, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, Metall Zug generates a yield of 2.5%, which is on the low-side for Consumer Durables stocks.
With this in mind, I definitely rank Metall Zug 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for METN’s future growth? Take a look at our free research report of analyst consensus for METN’s outlook.
- Valuation: What is METN 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 METN 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.