A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Kardex AG (VTX:KARN) has been paying a dividend to shareholders. Today it yields 2.8%. Let’s dig deeper into whether Kardex should have a place in your portfolio.
See our latest analysis for Kardex
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
-
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 dividend per share risen in the past couple of years?
-
Can it afford to pay the current rate of dividends from its earnings?
-
Will it have the ability to keep paying its dividends going forward?
How well does Kardex fit our criteria?
The company currently pays out 68% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 70%, leading to a dividend yield of 3.6%. Furthermore, EPS should increase to €5.09.
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.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Kardex as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Kardex has a yield of 2.8%, which is high for Machinery stocks but still below the market’s top dividend payers.
Next Steps:
If you are building an income portfolio, then Kardex is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. Below, I’ve compiled three important factors you should look at:
-
Future Outlook: What are well-informed industry analysts predicting for KARN’s future growth? Take a look at our free research report of analyst consensus for KARN’s outlook.
-
Valuation: What is KARN 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 KARN 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 editorial-team@simplywallst.com.