Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, RHÖN-KLINIKUM Aktiengesellschaft (FRA:RHK) has been paying a dividend to shareholders. Today it yields 1.0%. Let’s dig deeper into whether RHÖN-KLINIKUM should have a place in your portfolio.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- 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 the amount of dividend per share grown over the past?
- Can it afford 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 RHÖN-KLINIKUM fit our criteria?
RHÖN-KLINIKUM has a trailing twelve-month payout ratio of 41%, which means that the dividend is covered by earnings. Going forward, analysts expect RHK’s payout to increase to 45% of its earnings, which leads to a dividend yield of around 1.5%. Furthermore, EPS should increase to €0.79. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Not only have dividend payouts from RHÖN-KLINIKUM fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Relative to peers, RHÖN-KLINIKUM produces a yield of 1.0%, which is on the low-side for Healthcare stocks.
After digging a little deeper into RHÖN-KLINIKUM’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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 fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for RHK’s future growth? Take a look at our free research report of analyst consensus for RHK’s outlook.
- Valuation: What is RHK 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 RHK 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 email@example.com.