How Does TUI AG (ETR:TUI1) Fare As A Dividend Stock?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, TUI AG (ETR:TUI1) has paid a dividend to shareholders. It currently yields 7.6%. Let’s dig deeper into whether TUI should have a place in your portfolio.
Check out our latest analysis for TUI
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it the top 25% annual dividend yield payer?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How well does TUI fit our criteria?
The current trailing twelve-month payout ratio for the stock is 64%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 56% which, assuming the share price stays the same, leads to a dividend yield of around 8.7%. However, EPS should increase to €1.17, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. The reality is that it is too early to consider TUI 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.
Compared to its peers, TUI produces a yield of 7.6%, which is high for Hospitality stocks.
Next Steps:
Considering the dividend attributes we analyzed above, TUI is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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 essential factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for TUI1’s future growth? Take a look at our free research report of analyst consensus for TUI1’s outlook.
Valuation: What is TUI1 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 TUI1 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.
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.
