If you are interested in cashing in on CareTech Holdings PLC’s (LON:CTH) upcoming dividend of UK£0.035 per share, you only have 4 days left to buy the shares before its ex-dividend date, 11 October 2018, in time for dividends payable on the 23 November 2018. Is this future income a persuasive enough catalyst for investors to think about CareTech Holdings as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.

See our latest analysis for CareTech 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?

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

• Has dividend per share risen in the past couple of years?

• 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 does CareTech Holdings fare?

The current trailing twelve-month payout ratio for the stock is 40%, which means that the dividend is covered by earnings. However, going forward, analysts expect CTH’s payout to fall to 29% of its earnings, which leads to a dividend yield of around 2.9%.

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.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. CTH has increased its DPS from £0.030 to £0.10 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.

In terms of its peers, CareTech Holdings produces a yield of 2.7%, which is on the low-side for Healthcare stocks.

Next Steps:

Taking into account the dividend metrics, CareTech Holdings ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 key factors you should further research: