Yahoo Finance What To Know Before Buying Befesa S.A. (FRA:BFSA) For Its Dividend
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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Befesa S.A. (FRA:BFSA) has started paying a dividend to shareholders. It currently trades on a yield of 1.8%. Does Befesa tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Befesa
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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 it increased its dividend per share amount 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?
How well does Befesa fit our criteria?
The current trailing twelve-month payout ratio for the stock is 37%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 49% which, assuming the share price stays the same, leads to a dividend yield of around 3.5%. Moreover, EPS should increase to €2.86. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. 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 Befesa as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
In terms of its peers, Befesa has a yield of 1.8%, which is on the low-side for Commercial Services stocks.
Next Steps:
Whilst there are few things you may like about Befesa from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 fundamental factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for BFSA’s future growth? Take a look at our free research report of analyst consensus for BFSA’s outlook.
Valuation: What is BFSA 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 BFSA 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.
