Is Ringmetall AG (FRA:HP3) A Smart Choice For Dividend Investors?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Ringmetall AG (FRA:HP3) has paid a dividend to shareholders. It currently yields 1.7%. Should it have a place in your portfolio? Let’s take a look at Ringmetall in more detail.
Check out our latest analysis for Ringmetall
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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 the company be able to keep paying dividend based on the future earnings growth?
How does Ringmetall fare?
The current trailing twelve-month payout ratio for the stock is 28%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect HP3’s payout to fall to 25% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.1%. However, EPS should increase to €0.22, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. 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. Although HP3’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Compared to its peers, Ringmetall generates a yield of 1.7%, which is on the low-side for Machinery stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Ringmetall is definitely worth considering for investors looking to build a dedicated income portfolio. 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 aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for HP3’s future growth? Take a look at our free research report of analyst consensus for HP3’s outlook.
Valuation: What is HP3 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 HP3 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
