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Attention dividend hunters! Schaffer Corporation Limited (ASX:SFC) will be distributing its dividend of AU$0.30 per share on the 14 September 2018, and will start trading ex-dividend in 2 days time on the 30 August 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Schaffer can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

View our latest analysis for Schaffer

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?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

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

How does Schaffer fare?

The company currently pays out 33.0% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although SFC’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, Schaffer has a yield of 3.5%, which is high for Auto Components stocks but still below the market’s top dividend payers.

Next Steps:

Whilst there are few things you may like about Schaffer 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent aspects you should look at:

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

2. Valuation: What is SFC 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 SFC 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.