Over the past 10 years Whitehaven Coal Limited (ASX:WHC) has returned an average of 2.0% per year from dividend payouts. The company currently pays out a dividend yield of 8.0% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Whitehaven Coal in more detail.

View our latest analysis for Whitehaven Coal

5 checks you should use to assess a dividend stock

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?

• 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?

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

• Will it be able to continue to payout at the current rate in the future?

How well does Whitehaven Coal fit our criteria?

The current trailing twelve-month payout ratio for the stock is 50.8%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 51.7%, leading to a dividend yield of around 5.3%. In addition to this, EPS should increase to A$0.61.

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. Although WHC’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.

In terms of its peers, Whitehaven Coal produces a yield of 8.0%, which is high for Oil and Gas stocks.

Next Steps:

With this in mind, I definitely rank Whitehaven Coal as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their 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 key aspects you should further research:

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

2. Valuation: What is WHC 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 WHC 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 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.