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Investors who want to cash in on Bumitama Agri Ltd’s (SGX:P8Z) upcoming dividend of Rp0.0075 per share have only 2 days left to buy the shares before its ex-dividend date, 31 August 2018, in time for dividends payable on the 14 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Bumitama Agri’s latest financial data to analyse its dividend attributes.

View our latest analysis for Bumitama Agri

5 questions to ask before buying a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Does it pay an annual yield higher than 75% 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?

Does Bumitama Agri pass our checks?

Bumitama Agri has a trailing twelve-month payout ratio of 39.9%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect P8Z’s payout to fall to 29.9% of its earnings, which leads to a dividend yield of around 3.0%. However, EPS should increase to IDR743.7, 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. Unfortunately, it is really too early to view Bumitama Agri as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Bumitama Agri generates a yield of 3.9%, which is high for Food stocks but still below the market’s top dividend payers.

Next Steps:

If Bumitama Agri is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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. There are three fundamental aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for P8Z’s future growth? Take a look at our free research report of analyst consensus for P8Z’s outlook.

2. Valuation: What is P8Z 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 P8Z 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.