Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 10 years, A2A SpA (BIT:A2A) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether A2A should have a place in your portfolio. Check out our latest analysis for A2A
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- 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 be able to continue to payout at the current rate in the future?
How does A2A fare?The company currently pays out 48.18% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect A2A’s payout to increase to 56.19% of its earnings, which leads to a dividend yield of around 5.23%. Moreover, EPS should increase to €0.12. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward. 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. Dividend payments from A2A 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, A2A generates a yield of 4.03%, which is on the low-side for Integrated Utilities stocks.
If you are building an income portfolio, then A2A 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for A2A’s future growth? Take a look at our free research report of analyst consensus for A2A’s outlook.
- Valuation: What is A2A 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 A2A 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.