In This Article:
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Pandora A/S (CPH:PNDORA) has paid dividends to shareholders, and these days it yields 5.5%. Does Pandora tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Pandora
5 checks you should do on 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 it increased its dividend per share amount over the past?
-
Is is able to pay the current rate of dividends from its earnings?
-
Will it be able to continue to payout at the current rate in the future?
Does Pandora pass our checks?
The current trailing twelve-month payout ratio for the stock is 38%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 48% which, assuming the share price stays the same, leads to a dividend yield of 6.1%. However, EPS is forecasted to fall to DKK40.01 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. Unfortunately, it is really too early to view Pandora as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Pandora has a yield of 5.5%, which is high for Luxury stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Pandora as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three key factors you should further research: