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Investors who want to cash in on Rottneros AB (publ)'s (STO:RROS) upcoming dividend of kr0.70 per share have only 3 days left to buy the shares before its ex-dividend date, 03 May 2019, in time for dividends payable on the 09 May 2019. 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 Rottneros's most recent financial data to examine its dividend characteristics in more detail.
Check out our latest analysis for Rottneros
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is it paying an annual yield above 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has the amount of dividend per share grown over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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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 Rottneros fit our criteria?
The current trailing twelve-month payout ratio for the stock is 22%, which means that the dividend is covered by earnings. Going forward, analysts expect RROS's payout to increase to 42% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.6%. However, EPS is forecasted to fall to SEK1.53 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. Unfortunately, it is really too early to view Rottneros as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Rottneros produces a yield of 5.0%, which is high for Forestry stocks.
Next Steps:
Taking into account the dividend metrics, Rottneros 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I've put together three essential aspects you should look at: