A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the last few years Hemfosa Fastigheter AB (publ) (STO:HEMF) has paid a dividend to shareholders. Today it yields 4.1%. Should it have a place in your portfolio? Let’s take a look at Hemfosa Fastigheter in more detail.
View our latest analysis for Hemfosa Fastigheter
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Does it pay an annual yield higher than 75% 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 it increased its dividend per share amount over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Will it be able to continue to payout at the current rate in the future?
How well does Hemfosa Fastigheter fit our criteria?
Hemfosa Fastigheter has a trailing twelve-month payout ratio of 27%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect HEMF’s payout to increase to 49% of its earnings, which leads to a dividend yield of around 4.4%. However, EPS is forecasted to fall to SEK13.71 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. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. The reality is that it is too early to consider Hemfosa Fastigheter as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Hemfosa Fastigheter has a yield of 4.1%, which is high for Real Estate stocks but still below the market’s top dividend payers.
Next Steps:
Whilst there are few things you may like about Hemfosa Fastigheter from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. I’ve put together three important aspects you should further research: