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, HeidelbergCement AG (FRA:HEI) has been paying a dividend to shareholders. Today it yields 3.2%. Let’s dig deeper into whether HeidelbergCement should have a place in your portfolio.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does HeidelbergCement fare?
The company currently pays out 36% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect HEI’s payout to remain around the same level at 39% of its earnings, which leads to a dividend yield of around 4.5%. In addition to this, EPS should increase to €6.24.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. 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. Although HEI’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, HeidelbergCement produces a yield of 3.2%, which is high for Basic Materials stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, HeidelbergCement is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for HEI’s future growth? Take a look at our free research report of analyst consensus for HEI’s outlook.
- Valuation: What is HEI 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 HEI 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 firstname.lastname@example.org.