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Investors who want to cash in on HELLA GmbH & Co KGaA’s (FRA:HLE) upcoming dividend of €1.05 per share have only 4 days left to buy the shares before its ex-dividend date, 01 October 2018, in time for dividends payable on the 03 October 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at HELLA GmbH KGaA’s most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for HELLA GmbH KGaA

5 checks you should do on a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• 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 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 HELLA GmbH KGaA pass our checks?

The company currently pays out 30.0% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 31.0%, leading to a dividend yield of around 2.5%. Furthermore, EPS should increase to €4.89.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider HELLA GmbH KGaA as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, HELLA GmbH KGaA produces a yield of 2.0%, which is on the low-side for Auto Components stocks.

Next Steps:

Taking all the above into account, HELLA GmbH KGaA is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 aspects you should look at: