Investors who want to cash in on Avanza Bank Holding AB (publ)’s (STO:AZA) upcoming dividend of kr10.50 per share have only 2 days left to buy the shares before its ex-dividend date, 20 March 2019, in time for dividends payable on the 26 March 2019. Should you diversify into Avanza Bank Holding 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.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
Does Avanza Bank Holding pass our checks?
The company currently pays out 91% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect AZA’s payout to fall into a more sustainable range of 83% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.5%. Furthermore, EPS should increase to SEK14.86, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Avanza Bank Holding produces a yield of 2.5%, which is on the low-side for Capital Markets stocks.
If you are building an income portfolio, then Avanza Bank Holding is a complicated choice since it has some positive aspects as well as negative ones. 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 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.
- 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.