Important news for shareholders and potential investors in Elegant Hotels Group Plc (AIM:EHG): The dividend payment of $0.02 per share will be distributed into shareholder on 07 March 2018, and the stock will begin trading ex-dividend at an earlier date, 25 January 2018. Should you diversify into Elegant Hotels Group and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. See our latest analysis for Elegant Hotels Group

How I analyze a dividend stock

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

• Is its annual yield among the top 25% of dividend-paying companies?

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

• Has the amount of dividend per share grown over the past?

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

• Will the company be able to keep paying dividend based on the future earnings growth?

How well does Elegant Hotels Group fit our criteria?

The current payout ratio for the stock is 68.04%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect EHG’s payout to fall to 36.55% of its earnings, which leads to a dividend yield of around 3.73%. However, EPS should increase to $0.11, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. Unfortunately, it is really too early to view Elegant Hotels Group as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Elegant Hotels Group produces a yield of 4.40%, which is high for hospitality stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Elegant Hotels Group is definitely worth considering for investors 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 key aspects you should further research:

1. Valuation: What is EHG 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 EHG is currently mispriced by the market.