Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Arcadis NV (AMS:ARCAD) has paid dividends to shareholders, and these days it yields 3.3%. Should it have a place in your portfolio? Let’s take a look at Arcadis in more detail.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Arcadis fit our criteria?
Arcadis has a trailing twelve-month payout ratio of 56%, which means that the dividend is covered by earnings. However, going forward, analysts expect ARCAD’s payout to fall to 37% of its earnings, which leads to a dividend yield of 4.0%. However, EPS should increase to €1.22, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Compared to its peers, Arcadis produces a yield of 3.3%, which is on the low-side for Construction stocks.
Taking into account the dividend metrics, Arcadis 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:
- Future Outlook: What are well-informed industry analysts predicting for ARCAD’s future growth? Take a look at our free research report of analyst consensus for ARCAD’s outlook.
- Valuation: What is ARCAD worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ARCAD is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.