A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 3 years, International Consolidated Airlines Group SA (LON:IAG) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Does International Consolidated Airlines Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View out our latest analysis for International Consolidated Airlines Group
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- 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?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does International Consolidated Airlines Group fit our criteria?
International Consolidated Airlines Group has a trailing twelve-month payout ratio of 20.06%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 29.28%, leading to a dividend yield of 4.40%. However, EPS is forecasted to fall to €1.26 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view International Consolidated Airlines Group as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, International Consolidated Airlines Group has a yield of 3.52%, which is high for Airlines stocks but still below the market’s top dividend payers.
Whilst there are few things you may like about International Consolidated Airlines Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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, 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 fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for IAG’s future growth? Take a look at our free research report of analyst consensus for IAG’s outlook.
- Valuation: What is IAG 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 IAG 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 pass 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.