Have you been keeping an eye on BHP Billiton Limited’s (ASX:BHP) upcoming dividend of US$0.63 per share payable on the 25 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 06 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into BHP Billiton’s latest financial data to analyse its dividend attributes.

Check out our latest analysis for BHP Billiton

5 questions I ask before picking a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is their annual yield among the top 25% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Will it have the ability to keep paying its dividends going forward?

How well does BHP Billiton fit our criteria?

The current trailing twelve-month payout ratio for the stock is 81.1%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 73.2%, leading to a dividend yield of 5.1%. Furthermore, EPS should increase to $1.78.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Although BHP’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.

In terms of its peers, BHP Billiton has a yield of 4.1%, which is on the low-side for Metals and Mining stocks.

Next Steps:

Considering the dividend attributes we analyzed above, BHP Billiton is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. There are three important factors you should further research:

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

2. Valuation: What is BHP 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 BHP 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 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.