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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, Heineken Holding N.V. (AMS:HEIO) has been paying a dividend to shareholders. Today it yields 1.9%. Let’s dig deeper into whether Heineken Holding should have a place in your portfolio.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How does Heineken Holding fare?
Heineken Holding has a trailing twelve-month payout ratio of 43%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. In the case of HEIO it has increased its DPS from €0.70 to €1.47 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes HEIO a true dividend rockstar.
Compared to its peers, Heineken Holding has a yield of 1.9%, which is on the low-side for Beverage stocks.
If you are building an income portfolio, then Heineken Holding 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 important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for HEIO’s future growth? Take a look at our free research report of analyst consensus for HEIO’s outlook.
- Valuation: What is HEIO 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 HEIO 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.
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.