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Shares of Hufvudstaden AB (publ) (STO:HUFV A) will begin trading ex-dividend in 4 days. To qualify for the dividend check of kr3.70 per share, investors must have owned the shares prior to 22 March 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income a persuasive enough catalyst for investors to think about Hufvudstaden as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.

See our latest analysis for Hufvudstaden

Here’s how I find good dividend stocks

When researching a dividend stock, I always follow the following screening criteria:

• Is it paying an annual yield above 75% 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?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

How well does Hufvudstaden fit our criteria?

The company currently pays out 18% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect HUFV A’s payout to increase to 75% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.5%. However, EPS is forecasted to fall to SEK4.7 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

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. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

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. HUFV A has increased its DPS from SEK1.9 to SEK3.7 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes HUFV A a true dividend rockstar.

In terms of its peers, Hufvudstaden has a yield of 2.3%, which is on the low-side for Real Estate stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Hufvudstaden is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three relevant aspects you should look at: