Does EON SE (FRA:EOAN) Have A Place In Your Portfolio?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. EON SE (FRA:EOAN) has returned to shareholders over the past 10 years, an average dividend yield of 5.00% annually. Should it have a place in your portfolio? Let’s take a look at E.ON in more detail. Check out our latest analysis for E.ON

5 checks you should use to assess a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• 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?

• Is is able to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

DB:EOAN Historical Dividend Yield June 22nd 18

Does E.ON pass our checks?

The company currently pays out 15.56% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect EOAN’s payout to increase to 69.39% of its earnings, which leads to a dividend yield of 5.43%. However, EPS is forecasted to fall to €0.68 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Not only have dividend payouts from E.ON fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.

In terms of its peers, E.ON has a yield of 3.23%, which is on the low-side for Integrated Utilities stocks.

Next Steps:

If you are building an income portfolio, then E.ON is a complicated choice since it has some positive aspects as well as negative ones. 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. I’ve put together three relevant aspects you should look at:

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

2. Valuation: What is EOAN 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 EOAN 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 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.