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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, Airbus SE (EPA:AIR) has been paying a dividend to shareholders. Today it yields 1.7%. Does Airbus tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

View our latest analysis for Airbus

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5 questions I ask before picking a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• 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 it increased its dividend per share amount over the past?

• Does earnings amply cover its dividend payments?

• Will it have the ability to keep paying its dividends going forward?

Does Airbus pass our checks?

The company currently pays out 40% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect AIR’s payout to remain around the same level at 38% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.9%. In addition to this, EPS should increase to €5.29.

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 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. AIR has increased its DPS from €0.12 to €1.5 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.

Compared to its peers, Airbus produces a yield of 1.7%, which is high for Aerospace & Defense stocks but still below the low risk savings rate.

Next Steps:

Taking into account the dividend metrics, Airbus ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 fundamental aspects you should further examine: