Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Koninklijke BAM Groep nv (AMS:BAMNB) has been paying a dividend to shareholders. Today it yields 3.4%. Does Koninklijke BAM Groep tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does Koninklijke BAM Groep pass our checks?
Koninklijke BAM Groep has a trailing twelve-month payout ratio of 107%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect BAMNB’s payout to fall into a more sustainable range of 39% of its earnings, which leads to a dividend yield of 5.8%. In addition to this, EPS should increase to €0.41, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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 Koninklijke BAM Groep have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, Koninklijke BAM Groep generates a yield of 3.4%, which is on the low-side for Construction stocks.
After digging a little deeper into Koninklijke BAM Groep’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. Below, I’ve compiled three relevant aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for BAMNB’s future growth? Take a look at our free research report of analyst consensus for BAMNB’s outlook.
- Valuation: What is BAMNB 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 BAMNB 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.