Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Tenaris S.A. (BIT:TEN) has paid dividends to shareholders, and these days it yields 3.1%. Let's dig deeper into whether Tenaris should have a place in your portfolio.
Here's how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Tenaris pass our checks?
The current trailing twelve-month payout ratio for the stock is 55%, which means that the dividend is covered by earnings. However, going forward, analysts expect TEN's payout to fall to 43% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.6%. However, EPS should increase to $0.84, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. Dividend payments from Tenaris have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Tenaris generates a yield of 3.1%, which is on the low-side for Energy Services stocks.
If you are building an income portfolio, then Tenaris is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer 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 essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for TEN’s future growth? Take a look at our free research report of analyst consensus for TEN’s outlook.
- Valuation: What is TEN 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 TEN 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.
Tenaris S.A., together with its subsidiaries, produces and sells seamless and welded steel tubular products; and provides related services for the oil and gas industry, and other industrial applications.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
|Analysis Area||Score (0-6)|
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet with solid track record.