Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Grammer AG (FRA:GMM) has returned to shareholders over the past 10 years, an average dividend yield of 2.00% annually. Let’s dig deeper into whether Grammer should have a place in your portfolio. View out our latest analysis for Grammer
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does Grammer pass our checks?
Grammer has a trailing twelve-month payout ratio of 50.34%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 32.00%, leading to a dividend yield of 2.45%. However, EPS should increase to €4.71, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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. Although GMM’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, Grammer generates a yield of 2.07%, which is on the low-side for Auto Components stocks.
With these dividend metrics in mind, I definitely rank Grammer as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for GMM’s future growth? Take a look at our free research report of analyst consensus for GMM’s outlook.
- Valuation: What is GMM 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 GMM 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.