Is LEONI AG (FRA:LEO) A Smart Pick For Income Investors?

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. LEONI AG (FRA:LEO) has returned to shareholders over the past 10 years, an average dividend yield of 2.00% annually. Does LEONI tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View out our latest analysis for LEONI

5 questions I ask before picking a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has it increased its dividend per share amount over the past?

• 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?

DB:LEO Historical Dividend Yield June 23rd 18

Does LEONI pass our checks?

The current trailing twelve-month payout ratio for the stock is 29.96%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 30.51%, leading to a dividend yield of 3.23%. Furthermore, EPS should increase to €4.79.

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. Although LEO’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, LEONI produces a yield of 2.66%, which is high for Auto Components stocks but still below the market’s top dividend payers.

Next Steps:

With these dividend metrics in mind, I definitely rank LEONI as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 relevant aspects you should further examine:

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

2. Valuation: What is LEO 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 LEO is currently mispriced by the market.

3. 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 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.