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, Wallenius Wilhelmsen ASA (OB:WALWIL) has paid dividends to shareholders, and these days it yields 1.7%. Does Wallenius Wilhelmsen tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- 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?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Wallenius Wilhelmsen pass our checks?
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 lower payout ratio of 29% which, assuming the share price stays the same, leads to a dividend yield of 5.3%. However, EPS should increase to $0.43, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Wallenius Wilhelmsen as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Wallenius Wilhelmsen produces a yield of 1.7%, which is on the low-side for Shipping stocks.
After digging a little deeper into Wallenius Wilhelmsen’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for WALWIL’s future growth? Take a look at our free research report of analyst consensus for WALWIL’s outlook.
- Valuation: What is WALWIL 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 WALWIL 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.