A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Avanza Bank Holding AB (publ) (STO:AZA) has paid a dividend to shareholders. It currently yields 2.2%. Let’s dig deeper into whether Avanza Bank Holding should have a place in your portfolio.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% 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?
Does Avanza Bank Holding pass our checks?
The current trailing twelve-month payout ratio for the stock is 81%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 76%, leading to a dividend yield of around 2.7%. Moreover, EPS should increase to SEK15.91.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, Avanza Bank Holding produces a yield of 2.2%, which is on the low-side for Capital Markets stocks.
With these dividend metrics in mind, I definitely rank Avanza Bank Holding as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for AZA’s future growth? Take a look at our free research report of analyst consensus for AZA’s outlook.
- Valuation: What is AZA 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 AZA 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 email@example.com.