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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Wolters Kluwer N.V. (AMS:WKL) has been paying a dividend to shareholders. Today it yields 1.8%. Does Wolters Kluwer tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
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 it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Wolters Kluwer pass our checks?
Wolters Kluwer has a trailing twelve-month payout ratio of 37%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 36% which, assuming the share price stays the same, leads to a dividend yield of 1.8%. Moreover, EPS is forecasted to fall to €2.23 in the upcoming year.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Wolters Kluwer produces a yield of 1.8%, which is on the low-side for Professional Services stocks.
Whilst there are few things you may like about Wolters Kluwer 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 fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for WKL’s future growth? Take a look at our free research report of analyst consensus for WKL’s outlook.
- Valuation: What is WKL 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 WKL 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 firstname.lastname@example.org.
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