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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, BasicNet SpA (BIT:BAN) has paid dividends to shareholders, and these days it yields 1.4%. Let’s dig deeper into whether BasicNet should have a place in your portfolio.
Check out our latest analysis for BasicNet
Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share amount increased over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
How does BasicNet fare?
BasicNet has a trailing twelve-month payout ratio of 24.1%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect BAN’s payout to increase to 33.2% of its earnings, which leads to a dividend yield of 1.8%. However, EPS is forecasted to fall to €0.21 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Dividend payments from BasicNet have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Relative to peers, BasicNet generates a yield of 1.4%, which is on the low-side for Specialty Retail stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in BasicNet for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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. Below, I’ve compiled three relevant aspects you should further examine: