Yahoo Finance Investors Should Be Cautious Of Koninklijke KPN NV’s (AMS:KPN) 5.16% Dividend
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the past 10 years Koninklijke KPN NV (AMS:KPN) has returned an average of 5.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Koninklijke KPN should have a place in your portfolio. Check out our latest analysis for Koninklijke KPN
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Does it pay an annual yield higher than 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share risen in the past couple of years?
Can it afford 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?
How does Koninklijke KPN fare?
The current trailing twelve-month payout ratio for the stock is 83.11%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 100.98%, leading to a dividend yield of around 6.02%. However, EPS is forecasted to fall to €0.12 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
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. Not only have dividend payouts from Koninklijke KPN 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.
Relative to peers, Koninklijke KPN generates a yield of 5.16%, which is high for Telecom stocks but still below the market’s top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Koninklijke KPN for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three important factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for KPN’s future growth? Take a look at our free research report of analyst consensus for KPN’s outlook.
Valuation: What is KPN 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 KPN 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 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.
