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On the 02 January 2019, Bunzl plc (LON:BNZL) will be paying shareholders an upcoming dividend amount of UK£0.15 per share. However, investors must have bought the company’s stock before 15 November 2018 in order to qualify for the payment. That means you have only 4 days left! Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Bunzl’s latest financial data to analyse its dividend characteristics.

See our latest analysis for Bunzl

Here’s how I find good dividend stocks

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

• Is it paying an annual yield above 75% 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?

• Is is able 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?

Does Bunzl pass our checks?

Bunzl has a trailing twelve-month payout ratio of 47%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 40%, leading to a dividend yield of around 2.4%. However, EPS should increase to £1.1, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. BNZL has increased its DPS from £0.19 to £0.46 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.

In terms of its peers, Bunzl has a yield of 2.1%, which is on the low-side for Trade Distributors stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Bunzl is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important factors you should look at: