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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Lindab International AB (STO:LIAB) has paid a dividend to shareholders. It currently yields 2.1%. Let’s dig deeper into whether Lindab International should have a place in your portfolio.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How does Lindab International fare?
Lindab International has a trailing twelve-month payout ratio of 32%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 32% which, assuming the share price stays the same, leads to a dividend yield of around 2.8%. Moreover, EPS should increase to SEK5.93.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. 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. Not only have dividend payouts from Lindab International fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Lindab International generates a yield of 2.1%, which is high for Building stocks but still below the market’s top dividend payers.
Taking all the above into account, Lindab International is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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, 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 essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for LIAB’s future growth? Take a look at our free research report of analyst consensus for LIAB’s outlook.
- Valuation: What is LIAB 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 LIAB 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.