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Is Vonovia SE (ETR:VNA) An Attractive Dividend Stock?

A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Vonovia SE (ETR:VNA) has paid a dividend to shareholders. It currently yields 3.2%. Should it have a place in your portfolio? Let’s take a look at Vonovia in more detail.

See our latest analysis for Vonovia

5 checks you should do on 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 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?

  • Does earnings amply cover its dividend payments?

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

XTRA:VNA Historical Dividend Yield December 6th 18
XTRA:VNA Historical Dividend Yield December 6th 18

How well does Vonovia fit our criteria?

Vonovia has a trailing twelve-month payout ratio of 25%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect VNA’s payout to increase to 64% of its earnings, which leads to a dividend yield of around 3.8%. However, EPS is forecasted to fall to €4.09 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

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When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

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. Unfortunately, it is really too early to view Vonovia as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, Vonovia generates a yield of 3.2%, which is high for Real Estate stocks but still below the market’s top dividend payers.

Next Steps:

Whilst there are few things you may like about Vonovia from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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 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 essential factors you should look at:

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

  2. Historical Performance: What has VNA’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  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.