Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Northstar Realty Europe Corp (NYSE:NRE) has returned to shareholders over the past 2 years, an average dividend yield of 5.00% annually. Does Northstar Realty Europe tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Northstar Realty Europe

5 questions I ask before picking a dividend stock

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

• Is it the top 25% annual dividend yield payer?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share risen in the past couple of years?

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

• Will it have the ability to keep paying its dividends going forward?

How well does Northstar Realty Europe fit our criteria?

Northstar Realty Europe has a negative payout ratio, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Northstar Realty Europe as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. In terms of its peers, Northstar Realty Europe has a yield of 5.64%, which is high for REITs stocks.

Next Steps:

After digging a little deeper into Northstar Realty Europe’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. 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. There are three important aspects you should further research:

1. Valuation: What is NRE 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 NRE is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Northstar Realty Europe’s board and the CEO’s back ground.

3. 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 pass 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.