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Is CTT - Correios De Portugal, S.A. (ELI:CTT) A Great Dividend Stock?

Simply Wall St

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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, CTT - Correios De Portugal, S.A. (ELI:CTT) has paid dividends to shareholders, and these days it yields 3.8%. Should it have a place in your portfolio? Let's take a look at CTT - Correios De Portugal in more detail.

View our latest analysis for CTT - Correios De Portugal

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

  • 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 amount increased over the past?
  • Can it afford to pay the current rate of dividends from its earnings?
  • Will the company be able to keep paying dividend based on the future earnings growth?
ENXTLS:CTT Historical Dividend Yield, April 4th 2019

How does CTT - Correios De Portugal fare?

The company currently pays out 76% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 84% which, assuming the share price stays the same, leads to a dividend yield of around 6.5%. Furthermore, EPS should increase to €0.18. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

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.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Unfortunately, it is really too early to view CTT - Correios De Portugal as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, CTT - Correios De Portugal generates a yield of 3.8%, which is high for Logistics stocks but still below the market's top dividend payers.

Next Steps:

Taking all the above into account, CTT - Correios De Portugal is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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. There are three essential aspects you should look at:

  1. Future Outlook: What are well-informed industry analysts predicting for CTT’s future growth? Take a look at our free research report of analyst consensus for CTT’s outlook.
  2. Valuation: What is CTT 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 CTT is currently mispriced by the market.
  3. 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 editorial-team@simplywallst.com. 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.