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Should you be investing in Evraz (LON:EVR)?

15th Mar '19 by Jack Brumby

If you find a well-covered, steadily rising dividend payment paired with strong and improving financial health, chances are you are looking at a high-quality company. 

Take Evraz (LON:EVR), for example, which is classified as a speculative super stock company in the Basic Materials sector. The company pays out a rolling 13.1% of its share price in dividend payments. Can such a high yield really be sustainable, or is it just the market's way of telling us that this mining company is heading for a dividend cut? 


Why you need to know the Piotroski F-Score

We can run a quick check by looking at the group's Piotroski F-Score, which looks at nine checks separated into three main areas of financial analysis. First is profitability, where it examines operating profits and cash flow to make sure the business can sustain itself and pay dividends. Then come three checks on the capital structure of a business, followed by a final look at the firm’s operating efficiency.

This measure was designed to identify the most likely candidates for outperformance amongst a basket of apparently undervalued companies. The great thing about the F-Score is that it is essentially an entire quality and fundamental momentum screen in a single number. Stocks scoring 8 or 9 are considered strong. Those scoring 2 or less are considered weak. 

Evraz (LON:EVR): is its 13.1% dividend yield safe?

Stockopedia applies algorithms to its stream of financial data to automatically calculate the Piotroski F-Score for every stock on the market. It shows that Evraz (LON:EVR) scores 8 out of a possible 9. By investing in companies scoring 8 or 9 by these measures, Piotroski showed that, over a 20-year test period through to 1996, the return earned by a value-focused investor could be increased by an astounding 7.5% each year. Even better, it suggests that the company is well-placed to continue to pay out attractive dividends.

Evraz's strong fundamental momentum, its unusually high yield of 13.1%, the relative strength of its share price of 41.2%, and its modest valuation of 7.51 times rolling earnings, certainly suggest this miner is worth looking at in greater depth.

What does this mean for potential investors?

Evraz has an F-Score that suggests it could be a promising investment candidate worthy of further research - but it's only a first step. Higher F-Score stocks can still have weaknesses and may trade at premium prices compared to other stocks. We've identified some areas of concern with Evraz that you can find out about here.

Alternatively, if you'd like to find more shares with high F-Scores, just come and take a look at this High F-Score screen.

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