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Important news for shareholders and potential investors in Aéroports de Paris SA (EPA:ADP): The dividend payment of €0.70 per share will be distributed to shareholders on 10 December 2018, and the stock will begin trading ex-dividend at an earlier date, 06 December 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Aéroports de Paris’s most recent financial data to examine its dividend characteristics in more detail.
Check out our latest analysis for Aéroports de Paris
5 questions I ask before picking a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is their annual yield among the top 25% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share amount increased over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Aéroports de Paris fit our criteria?
The current trailing twelve-month payout ratio for the stock is 56%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 62%, leading to a dividend yield of 2.2%. However, EPS is forecasted to fall to €5.96 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Although ADP’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, Aéroports de Paris has a yield of 2.0%, which is on the low-side for Infrastructure stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Aéroports de Paris 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. I’ve put together three pertinent factors you should further examine: