Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 10 years, Aegon NV (AMS:AGN) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Aegon should have a place in your portfolio.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- 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?
Does Aegon pass our checks?
Aegon has a trailing twelve-month payout ratio of 23.75%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 40.54%, leading to a dividend yield of 5.48%. However, EPS is forecasted to fall to €0.63 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
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. Not only have dividend payouts from Aegon fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, Aegon has a yield of 5.18%, which is high for Insurance stocks but still below the market’s top dividend payers.
Whilst there are few things you may like about Aegon from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three relevant aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for AGN’s future growth? Take a look at our free research report of analyst consensus for AGN’s outlook.
- Valuation: What is AGN 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 AGN 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 email@example.com.