Investors who want to cash in on Enero Group Limited’s (ASX:EGG) upcoming dividend of AU$0.025 per share have only 3 days left to buy the shares before its ex-dividend date, 21 September 2018, in time for dividends payable on the 08 October 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Enero Group’s latest financial data to analyse its dividend attributes.

See our latest analysis for Enero Group

5 questions I ask before picking 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 it paid dividend every year without dramatically reducing payout in the past?

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

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

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

How does Enero Group fare?

The current trailing twelve-month payout ratio for the stock is 39.8%, which means that the dividend is covered by earnings. Going forward, analysts expect EGG’s payout to increase to 50.1% of its earnings, which leads to a dividend yield of around 4.3%. Moreover, EPS should increase to A$0.10. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Enero Group fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.

Relative to peers, Enero Group produces a yield of 4.0%, which is on the low-side for Media stocks.

Next Steps:

Whilst there are few things you may like about Enero 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three key aspects you should further research:

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

2. Valuation: What is EGG 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 EGG 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.