Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Helgeland Sparebank (OB:HELG) has been paying a dividend to shareholders. Today it yields 5.7%. Should it have a place in your portfolio? Let’s take a look at Helgelandrebank in more detail.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does Helgelandrebank fit our criteria?
The current trailing twelve-month payout ratio for the stock is 49%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 52% which, assuming the share price stays the same, leads to a dividend yield of around 7.7%. Moreover, EPS should increase to NOK9.04.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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 Helgelandrebank 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.
In terms of its peers, Helgelandrebank produces a yield of 5.7%, which is high for Banks stocks.
Keeping in mind the dividend characteristics above, Helgelandrebank is definitely worth considering for investors looking to build a dedicated income portfolio. 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. Below, I’ve compiled three important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for HELG’s future growth? Take a look at our free research report of analyst consensus for HELG’s outlook.
- Valuation: What is HELG 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 HELG 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.