Attention dividend hunters! Adelaide Brighton Limited (ASX:ABC) will be distributing its dividend of AU$0.13 per share on the 11 October 2018, and will start trading ex-dividend in 3 days time on the 07 September 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Adelaide Brighton’s most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for Adelaide Brighton

5 checks you should do on a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share amount increased over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How well does Adelaide Brighton fit our criteria?

Adelaide Brighton has a trailing twelve-month payout ratio of 70.0%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect ABC’s payout to remain around the same level at 76.7% of its earnings, which leads to a dividend yield of 4.2%. Furthermore, EPS should increase to A$0.33.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although ABC’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.

Compared to its peers, Adelaide Brighton produces a yield of 3.9%, which is high for Basic Materials stocks but still below the market’s top dividend payers.

Next Steps:

Considering the dividend attributes we analyzed above, Adelaide Brighton 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. I’ve put together three important factors you should look at:

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

2. Valuation: What is ABC 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 ABC 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.