Does Wacker Neuson SE (FRA:WAC) Have A Place In Your Portfolio?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Wacker Neuson SE (FRA:WAC) has been paying a dividend to shareholders. Today it yields 2.7%. Does Wacker Neuson tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Wacker Neuson
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is its annual yield among the top 25% of dividend-paying companies?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has it increased its dividend per share amount over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
How well does Wacker Neuson fit our criteria?
The company currently pays out 30% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect WAC’s payout to increase to 41% of its earnings, which leads to a dividend yield of 3.7%. However, EPS is forecasted to fall to €1.95 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. 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. Although WAC’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Compared to its peers, Wacker Neuson has a yield of 2.7%, which is high for Machinery stocks but still below the market’s top dividend payers.
Next Steps:
Keeping in mind the dividend characteristics above, Wacker Neuson is definitely worth considering for investors looking to build a dedicated income portfolio. 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. I’ve put together three important factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for WAC’s future growth? Take a look at our free research report of analyst consensus for WAC’s outlook.
Valuation: What is WAC 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 WAC 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.
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 editorial-team@simplywallst.com.
