Why Buying Getlink SE (EPA:GET) For Its 2.65% Dividend Could Be A Mistake

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Getlink SE (EPA:GET) has returned to shareholders over the past 9 years, an average dividend yield of 2.00% annually. Should it have a place in your portfolio? Let’s take a look at Getlink in more detail.

See our latest analysis for Getlink

5 checks you should use to assess a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

  • Is their annual yield among the top 25% of dividend payers?
  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
  • Has dividend per share amount increased over the past?
  • Does earnings amply cover its dividend payments?
  • Will it have the ability to keep paying its dividends going forward?
ENXTPA:GET Historical Dividend Yield August 6th 18
ENXTPA:GET Historical Dividend Yield August 6th 18

How does Getlink fare?

Getlink has a trailing twelve-month payout ratio of 137.28%, meaning the dividend is not sufficiently covered by its earnings. Going forward, analysts expect GET’s payout to reduce to 111.51% of its earnings, which leads to a dividend yield of 3.62%. However, EPS should increase to €0.29, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Getlink as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Getlink has a yield of 2.65%, which is on the low-side for Infrastructure stocks.

Next Steps:

After digging a little deeper into Getlink’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. There are three relevant aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for GET’s future growth? Take a look at our free research report of analyst consensus for GET’s outlook.
  2. Valuation: What is GET 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 GET is currently mispriced by the market.
  3. 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 editorial-team@simplywallst.com.