Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Spectra Energy Partners LP (NYSE:SEP) has returned to shareholders over the past 10 years, an average dividend yield of 6.00% annually. Let’s dig deeper into whether Spectra Energy Partners should have a place in your portfolio. View our latest analysis for Spectra Energy Partners

Here’s how I find good dividend stocks

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

• Is it paying an annual yield above 75% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

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

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

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

How does Spectra Energy Partners fare?

Spectra Energy Partners has a trailing twelve-month payout ratio of more than 200% of earnings, which suggests that the dividend is not well-covered by earnings by any means. In the near future, analysts are predicting a more sensible payout ratio of 111.00%, leading to a dividend yield of around 10.48%. Furthermore, EPS should increase to $3.14, 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. SEP has increased its DPS from $1.32 to $3.01 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. Relative to peers, Spectra Energy Partners produces a yield of 9.78%, which is high for Oil and Gas stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Spectra Energy Partners is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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 fundamental aspects you should further examine:

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

2. Valuation: What is SEP 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 SEP 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 pass 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.