Yahoo Finance How Does Koninklijke Philips NV (AMS:PHIA) Fare As A Dividend Stock?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Koninklijke Philips NV (AMS:PHIA) has paid dividends to shareholders, and these days it yields 2.3%. Should it have a place in your portfolio? Let’s take a look at Koninklijke Philips in more detail.
See our latest analysis for Koninklijke Philips
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has it increased its dividend per share amount over the past?
Can it afford 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?
How well does Koninklijke Philips fit our criteria?
The company currently pays out 85% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect PHIA’s payout to fall to 42% of its earnings, which leads to a dividend yield of 2.5%. However, EPS should increase to €1.51, 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.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. PHIA has increased its DPS from €0.70 to €0.80 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes PHIA a true dividend rockstar.
Compared to its peers, Koninklijke Philips produces a yield of 2.3%, which is high for Medical Equipment stocks but still below the low risk savings rate.
Next Steps:
With this in mind, I definitely rank Koninklijke Philips as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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. There are three pertinent aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for PHIA’s future growth? Take a look at our free research report of analyst consensus for PHIA’s outlook.
Valuation: What is PHIA 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 PHIA is currently mispriced by the market.
Other 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.
