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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, BPER Banca S.p.A. (BIT:BPE) has paid dividends to shareholders, and these days it yields 3.8%. Let’s dig deeper into whether BPER Banca should have a place in your portfolio.
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How well does BPER Banca fit our criteria?
The current trailing twelve-month payout ratio for the stock is 16%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect BPE’s payout to increase to 31% of its earnings. Assuming a constant share price, this equates to a dividend yield of 5.3%. However, EPS is forecasted to fall to €0.46 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. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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 BPER Banca 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.
In terms of its peers, BPER Banca produces a yield of 3.8%, which is on the low-side for Banks stocks.
If you are building an income portfolio, then BPER Banca is a complicated choice since it has some positive aspects as well as negative ones. 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. I’ve put together three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for BPE’s future growth? Take a look at our free research report of analyst consensus for BPE’s outlook.
- Valuation: What is BPE 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 BPE is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.