Should Raiffeisen Bank International AG (VIE:RBI) Be Part Of Your Portfolio?
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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Raiffeisen Bank International AG (VIE:RBI) has paid a dividend to shareholders. It currently yields 2.7%. Does Raiffeisen Bank International tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Raiffeisen Bank International
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is it the top 25% annual dividend yield payer?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has the amount of dividend per share grown over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will the company be able to keep paying dividend based on the future earnings growth?
How does Raiffeisen Bank International fare?
The company currently pays out 15% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 54% which, assuming the share price stays the same, leads to a dividend yield of around 6.5%. However, EPS is forecasted to fall to €3.61 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. 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. Not only have dividend payouts from Raiffeisen Bank International fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, Raiffeisen Bank International generates a yield of 2.7%, which is on the low-side for Banks stocks.
Next Steps:
Taking all the above into account, Raiffeisen Bank International is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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. There are three important factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for RBI’s future growth? Take a look at our free research report of analyst consensus for RBI’s outlook.
Valuation: What is RBI 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 RBI 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 editorial-team@simplywallst.com.
