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, Terna – Rete Elettrica Nazionale Società per Azioni (BIT:TRN) has been paying a dividend to shareholders. Today it yields 4.1%. Should it have a place in your portfolio? Let’s take a look at Terna – Rete Elettrica Nazionale Società per Azioni in more detail.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- 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?
How does Terna – Rete Elettrica Nazionale Società per Azioni fare?
The company currently pays out 42% 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 TRN’s payout to increase to 73% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.0%. In addition to this, EPS should increase to €0.36. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Although TRN’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Terna – Rete Elettrica Nazionale Società per Azioni produces a yield of 4.1%, which is high for Electric Utilities stocks but still below the market’s top dividend payers.
Taking into account the dividend metrics, Terna – Rete Elettrica Nazionale Società per Azioni ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three important aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for TRN’s future growth? Take a look at our free research report of analyst consensus for TRN’s outlook.
- Valuation: What is TRN 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 TRN is currently mispriced by the market.
- Other 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.