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Attention dividend hunters! ENCE Energía y Celulosa SA (BME:ENC) will be distributing its dividend of €0.084 per share on the 12 September 2018, and will start trading ex-dividend in 2 days time on the 10 September 2018. Is this future income a persuasive enough catalyst for investors to think about ENCE Energía y Celulosa as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
View our latest analysis for ENCE Energía y Celulosa
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is it the top 25% annual dividend yield payer?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has dividend per share amount increased over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does ENCE Energía y Celulosa fit our criteria?
The current trailing twelve-month payout ratio for the stock is 36.9%, which means that the dividend is covered by earnings. Going forward, analysts expect ENC’s payout to increase to 51.5% of its earnings, which leads to a dividend yield of 4.1%. Furthermore, EPS should increase to €0.57. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
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. Dividend payments from ENCE Energía y Celulosa 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, ENCE Energía y Celulosa generates a yield of 1.5%, which is on the low-side for Forestry stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in ENCE Energía y Celulosa for the dividend. 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. Below, I’ve compiled three fundamental factors you should further examine: