Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. ENAV S.p.A. (BIT:ENAV) has paid a dividend to shareholders in the last few years. It currently yields 4.3%. Should it have a place in your portfolio? Let’s take a look at ENAV in more detail.
5 questions I ask before picking 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?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does ENAV fit our criteria?
The company currently pays out 91% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a payout ratio of 96%, which, assuming the share price stays the same, leads to a dividend yield of 4.8%. In addition to this, EPS should increase to €0.21.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view ENAV as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, ENAV generates a yield of 4.3%, which is on the low-side for Infrastructure stocks.
Now you know to keep in mind the reason why investors should be careful investing in ENAV 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, 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 ENAV’s future growth? Take a look at our free research report of analyst consensus for ENAV’s outlook.
- Valuation: What is ENAV 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 ENAV 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 email@example.com.