Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Neste Oyj (HEL:NESTE) has paid dividends to shareholders, and these days it yields 2.3%. Should it have a place in your portfolio? Let’s take a look at Neste Oyj in more detail.
5 checks you should use to assess 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 paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does Neste Oyj pass our checks?
The current trailing twelve-month payout ratio for the stock is 43.8%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 50.3%, leading to a dividend yield of around 2.8%. Moreover, EPS should increase to €3.97. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Neste Oyj generates a yield of 2.3%, which is on the low-side for Oil and Gas stocks.
If Neste Oyj is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NESTE’s future growth? Take a look at our free research report of analyst consensus for NESTE’s outlook.
- Valuation: What is NESTE 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 NESTE 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.