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There is a lot to be liked about Koninklijke Vopak NV (AMS:VPK) as an income stock. It has paid dividends over the past 10 years. The company is currently worth €5.0b, and now yields roughly 2.7%. Let’s dig deeper into whether Koninklijke Vopak should have a place in your portfolio.

See our latest analysis for Koninklijke Vopak

5 checks you should do on a dividend stock

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

• Does it pay an annual yield higher than 75% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will the company be able to keep paying dividend based on the future earnings growth?

Does Koninklijke Vopak pass our checks?

Koninklijke Vopak has a trailing twelve-month payout ratio of 60%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect VPK’s payout to fall to 45% of its earnings, which leads to a dividend yield of around 2.9%. However, EPS should increase to €2.27, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. VPK has increased its DPS from €0.47 to €1.05 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 VPK a true dividend rockstar.

In terms of its peers, Koninklijke Vopak has a yield of 2.7%, which is on the low-side for Oil and Gas stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Koninklijke Vopak is definitely worth considering for investors looking to build a dedicated income portfolio. 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 fundamental aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for VPK’s future growth? Take a look at our free research report of analyst consensus for VPK’s outlook.

2. Valuation: What is VPK 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 VPK is currently mispriced by the market.

3. Other 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.