Have you been keeping an eye on EQT Holdings Limited’s (ASX:EQT) upcoming dividend of AU$0.42 per share payable on the 09 October 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 10 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 EQT Holdings’s most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for EQT Holdings

5 questions I ask before picking a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• 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 it increased its dividend per share amount over the past?

• Is is able to pay the current rate of dividends from its earnings?

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

How well does EQT Holdings fit our criteria?

The company currently pays out 84.3% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 77.5%, leading to a dividend yield of around 4.5%. Moreover, EPS should increase to A$1.15.

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. The reality is that it is too early to consider EQT Holdings as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, EQT Holdings generates a yield of 3.6%, which is on the low-side for Capital Markets stocks.

Next Steps:

Whilst there are few things you may like about EQT Holdings from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important aspects you should further examine:

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

2. Valuation: What is EQT 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 EQT is currently mispriced by the market.

3. 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.