Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Effecten-Spiegel AG (BST:EFS3) has been paying a dividend to shareholders. Today it yields 4.8%. Should it have a place in your portfolio? Let’s take a look at Effecten-Spiegel in more detail.
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown 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 well does Effecten-Spiegel fit our criteria?
The current payout ratio for EFS3 is negative, which means that it is loss-making, and paying its dividend from its retained earnings.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Effecten-Spiegel as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Effecten-Spiegel generates a yield of 4.8%, which is high for Capital Markets stocks.
After digging a little deeper into Effecten-Spiegel’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for EFS3’s future growth? Take a look at our free research report of analyst consensus for EFS3’s outlook.
- Valuation: What is EFS3 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 EFS3 is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.