Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Remedy Entertainment Oyj (HEL:REMEDY) has recently paid dividends to shareholders, and currently yields 1.2%. Does Remedy Entertainment Oyj tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
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 it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has the amount of dividend per share grown 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 does Remedy Entertainment Oyj fare?
REMEDY currently pays out twice what it is earning, according to its trailing twelve-month data, meaning that the dividend is predominantly funded by retained earnings. In the near future, analysts are predicting a more sensible payout ratio of 76% which, assuming the share price stays the same, leads to a dividend yield of 4.1%. Furthermore, EPS should increase to €0.50, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. The reality is that it is too early to consider Remedy Entertainment Oyj as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Remedy Entertainment Oyj generates a yield of 1.2%, which is on the low-side for Entertainment stocks.
Now you know to keep in mind the reason why investors should be careful investing in Remedy Entertainment Oyj for the dividend. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for REMEDY’s future growth? Take a look at our free research report of analyst consensus for REMEDY’s outlook.
- Valuation: What is REMEDY 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 REMEDY 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. On rare occasion, data errors may occur. Thank you for reading.
Discounted cash flow calculation for every stock
Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.