Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Bilfinger SE (FRA:GBF) has returned to shareholders over the past 10 years, an average dividend yield of 3.00% annually. Does Bilfinger tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Bilfinger fit our criteria?
Bilfinger has a negative payout ratio, which means that it is loss-making, and paying its dividend from its retained earnings.
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. Dividend payments from Bilfinger 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.
Relative to peers, Bilfinger generates a yield of 2.33%, which is high for Commercial Services stocks but still below the market’s top dividend payers.
Now you know to keep in mind the reason why investors should be careful investing in Bilfinger for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. Below, I’ve compiled three key aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for GBF’s future growth? Take a look at our free research report of analyst consensus for GBF’s outlook.
- Valuation: What is GBF 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 GBF 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.
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.