Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Kojamo Oyj (HEL:KOJAMO) has started paying a dividend to shareholders. It currently trades on a yield of 3.0%. Let’s dig deeper into whether Kojamo Oyj should have a place in your portfolio.
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- 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?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Kojamo Oyj fit our criteria?
The current trailing twelve-month payout ratio for the stock is 31%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect KOJAMO’s payout to increase to 63% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.6%. In addition to this, EPS should increase to €1.03. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
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.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Kojamo Oyj as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
In terms of its peers, Kojamo Oyj has a yield of 3.0%, which is on the low-side for Real Estate stocks.
Taking all the above into account, Kojamo Oyj is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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. There are three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for KOJAMO’s future growth? Take a look at our free research report of analyst consensus for KOJAMO’s outlook.
- Valuation: What is KOJAMO 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 KOJAMO 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.
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 firstname.lastname@example.org. 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.