On the 05 April 2019, Auckland International Airport Limited (NZSE:AIA) will be paying shareholders an upcoming dividend amount of NZ$0.13 per share. However, investors must have bought the company’s stock before 21 March 2019 in order to qualify for the payment. That means you have only 2 days left! Should you diversify into Auckland International Airport and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
Does Auckland International Airport pass our checks?
The current trailing twelve-month payout ratio for the stock is 42%, which means that the dividend is covered by earnings. Going forward, analysts expect AIA’s payout to increase to 101% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.0%. However, EPS is forecasted to fall to NZ$0.23 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. AIA has increased its DPS from NZ$0.069 to NZ$0.22 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 AIA a true dividend rockstar.
In terms of its peers, Auckland International Airport produces a yield of 2.8%, which is on the low-side for Infrastructure stocks.
Whilst there are few things you may like about Auckland International Airport 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 fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for AIA’s future growth? Take a look at our free research report of analyst consensus for AIA’s outlook.
- Historical Performance: What has AIA’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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 firstname.lastname@example.org. 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.