Why the Koninklijke Ahold Delhaize Nv dividend deserves a closer look

Why the Koninklijke Ahold Delhaize Nv dividend deserves a closer look

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Dividend payouts are a vital part of the return that investors get from owning stocks over time. Whether you're after large-cap cash cows or small-cap growth stocks, dividends can be a pointer to well financed, well managed companies - and Koninklijke Ahold Delhaize Nv (AMS:AD) is just one example.

Given the volatile market conditions this year, knowing how to track down sustainable dividends is more important than ever. History shows that solid, high yielding stocks are a reliable source of investment profits in good times and bad. But how do you find them?

There are several ways of finding attractive dividend stocks, but it's worth keeping in mind a few key rules. Let’s look at the Koninklijke Ahold Delhaize Nv dividend as an example of what to look for.

Rules for finding dividend shares

1. High (but not excessive) dividend yield

Yield is an important dividend metric because it tells you the percentage of how much a company pays out in dividends each year relative to its share price. That makes it easy to compare dividend payouts right across the market. 

High yields are obviously appealing but be careful of excessively high yields (usually above 10%) because they can be a sign of problems. When the market suspects a company may be unable to sustain its dividend, the share price will fall and actually push the yield higher - and this can be a trap. So it pays to be wary of excessive yields.

  • Koninklijke Ahold Delhaize Nv is a player in the Food & Drug Retailing industry. It has a dividend yield of 3.21%.

2. Dividend growth

Another important marker for income investors is a track record of dividend growth - and evidence that the growth will continue. Consistent dividend growth can be a pointer to companies that are carefully managing their payout policies - and rewarding their shareholders over time. Rather than aggressively dishing out earnings, dividend growth companies tend to have more modest yields, but are better at sustaining their payouts.

  • Koninklijke Ahold Delhaize Nv has increased its dividend payout 7 times over the past 10 years - and the dividend per share is forecast to grow by 26.3% in the coming year.

3. Dividend safety

Attractively high yields obviously turn heads - but it’s important to know that a dividend is affordable. Dividend Cover (similar to the payout ratio) is a go-to measure of a company's net income over the dividend paid to shareholders. It’s calculated as earnings per share divided by the dividend per share and helps to indicate how sustainable a dividend is.

Dividend cover of less than 1x suggests that the company can’t fund the payout from its current year earnings - and might be relying on other sources of funds to pay it.

  • Koninklijke Ahold Delhaize Nv has dividend cover of 2.42.

What does this mean for potential investors?

Yield, Growth and Safety are the three main pillars that support some of the most popular dividend investing strategies. But it's important to know that dividend payouts can be cut or cancelled very quickly when the outlook changes.

To get a fuller understanding of the dividend prospects for any stock, it's important to do some investigation yourself. Indeed, we've identified areas of concern with Koninklijke Ahold Delhaize NV that you can find out about here.


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Koninklijke Ahold Delhaize NV's StockRank™

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Koninklijke Ahold Delhaize NV's StockRank™

With a StockRank of 92, Koninklijke Ahold Delhaize NV is more attractive than 92% of the 7,586 stocks we cover in Europe, according to our proprietary ranking system.

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