Shares of Methven Limited (NZSE:MVN) will begin trading ex-dividend in 4 days. To qualify for the dividend check of NZ$0.04 per share, investors must have owned the shares prior to 15 March 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income a persuasive enough catalyst for investors to think about Methven 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. Check out our latest analysis for Methven

5 checks you should do on a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

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

• Is it able 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 Methven fit our criteria?

The company currently pays out 85.67% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect MVN’s payout to fall to 74.32% of its earnings, which leads to a dividend yield of 7.80%. However, EPS should increase to NZ$0.1, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. Not only have dividend payouts from Methven fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends. Compared to its peers, Methven generates a yield of 6.42%, which is high for Building stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Methven as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 important factors you should look at: