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Have you been keeping an eye on Coats Group plc’s (LON:COA) upcoming dividend of US$0.005 per share payable on the 16 November 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 25 October 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Coats Group’s latest financial data to analyse its dividend characteristics.

See our latest analysis for Coats Group

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

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

• Is its earnings sufficient to payout dividend at the current rate?

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

Does Coats Group pass our checks?

The company currently pays out 28% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 23%, leading to a dividend yield of 1.9%. However, EPS should increase to $0.062, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although COA’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, Coats Group generates a yield of 1.5%, which is on the low-side for Luxury stocks.

Next Steps:

Whilst there are few things you may like about Coats Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 essential aspects you should look at: