How Does FRIWO AG (FRA:CEA) Fare As A Dividend Stock?

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, FRIWO AG (FRA:CEA) has paid dividends to shareholders, and these days it yields 1.8%. Does FRIWO tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

View our latest analysis for FRIWO

5 checks you should do on a dividend stock

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 consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

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

DB:CEA Historical Dividend Yield January 25th 19

How well does FRIWO fit our criteria?

The current trailing twelve-month payout ratio for the stock is 74%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

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.

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. CEA investors will be well aware the dividend payments are lower today than they were 10 years ago, although the payments have at least been steady. However, income investors that value stability over growth may still find CEA appealing.

In terms of its peers, FRIWO produces a yield of 1.8%, which is on the low-side for Electrical stocks.

Next Steps:

Taking all the above into account, FRIWO is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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 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 important factors you should further research:

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

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

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 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.