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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. Poste Italiane SpA (BIT:PST) has paid a dividend to shareholders in the last few years. It currently yields 5.5%. Should it have a place in your portfolio? Let’s take a look at Poste Italiane in more detail.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
Does Poste Italiane pass our checks?
The current trailing twelve-month payout ratio for the stock is 54%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect PST’s payout to remain around the same level at 51% of its earnings. Assuming a constant share price, this equates to a dividend yield of 6.4%. Moreover, EPS is forecasted to fall to €0.77 in the upcoming year.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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 Poste Italiane 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, Poste Italiane generates a yield of 5.5%, which is on the low-side for Insurance stocks.
Considering the dividend attributes we analyzed above, Poste Italiane 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. There are three pertinent factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for PST’s future growth? Take a look at our free research report of analyst consensus for PST’s outlook.
- Valuation: What is PST 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 PST 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 email@example.com.