Nwf (LON:NWF) cover image
65 Reads (3 mins read)

What the F-Score says about Nwf’s (LON:NWF) chunky dividend payment

15th Mar by Jack Brumby

Knowing how to steer clear of disastrous investments is just as valuable as picking winners - this is why legendary investors such as Seth Klarman always advise prudent risk management. Take Nwf (LON:NWF), for example, which is a balanced super stock company in the Energy sector.

Nwf (LON:NWF) pays out a rolling 4.02% of its share price in dividend payments. But sometimes a high dividend yield can signal skepticism from the market. How do we know if we can trust Nwf's forecast yield?

One way to check is to see whether its financial health is improving or deteriorating. We want to avoid companies with declining financial health whose dividend payments might be at risk and invest in companies with improving fundamentals whose dividend payments are well supported.

Luckily, there is a tried-and-tested checklist tailored precisely to this task.

GET MORE DATA-DRIVEN INSIGHTS INTO LON:NWF »

Why you need to know the Piotroski F-Score

Followers of celebrated accounting professor Joseph Piotroski are well aware of the checklist that made him famous at the turn of the millennium. Piotroski is behind the F-Score: a simple indicator to highlight stocks showing the most likely prospects for outperformance amongst a basket of apparently undervalued companies.

The great thing about the F-Score is that it essentially is an entire quality and fundamental momentum screen in a single number. Applying it as a filter on top of almost any strategy can help to increase returns and reduce risk.

The F-Score is made up of nine checks split up 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.

Nwf (LON:NWF), its F-Score, and what you need to do about it

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 Nwf (LON:NWF) 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.

Find more high-quality stocks

This F-Score suggests Nwf (LON:NWF) is a promising investment candidate and is worthy of further research - but it is only a first step. It has been proven that higher F-Score stocks often trade at a premium compared to other stocks. Investors like to pay up for quality but its important not to pay too much. We suggest checking the various value factor measures for Nwf's on Stockopedia's platform for retail investors.

For years, the Stockopedia team has been reading through academic literature and analysing its own proprietary data to figure out which checklists, screens, and metrics can help take the guesswork out of investing. We arm investors with the tools they need to invest sensibly and avoid big losses. You can look through Stockopedia’s Piotroski F-Score screens to identify other investment candidates, or even create your own customised screen.

Share this article
As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.
Nwf
Share Price
151.5p
Change Today
-2.88%
Nwf ( )

Stockopedia is here to help individual investors beat the markets by being the very best in stock analysis, research & community. Take a 30 day free trial of our extensive multi-award winning service and find out why more than ten thousand global investors can't live without it.

© Stockopedia 2019, Thomson Reuters, Share Data Services.
This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.