Should Pandora A/S (CPH:PNDORA) Be Part Of Your Dividend Portfolio?
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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, Pandora A/S (CPH:PNDORA) has paid dividends to shareholders, and these days it yields 5.5%. Does Pandora tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Pandora
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it the top 25% annual dividend yield payer?
Has it paid dividend every year without dramatically reducing payout in the past?
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?
Does Pandora pass our checks?
The current trailing twelve-month payout ratio for the stock is 38%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 48% which, assuming the share price stays the same, leads to a dividend yield of 6.1%. However, EPS is forecasted to fall to DKK40.01 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. Unfortunately, it is really too early to view Pandora as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Pandora has a yield of 5.5%, which is high for Luxury stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Pandora as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 key factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for PNDORA’s future growth? Take a look at our free research report of analyst consensus for PNDORA’s outlook.
Valuation: What is PNDORA 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 PNDORA 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.
