Have you been keeping an eye on NZX Limited’s (NZSE:NZX) upcoming dividend of NZ$0.053 per share payable on the 14 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 30 August 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding NZX can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

See our latest analysis for NZX

5 checks you should do on a dividend stock

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

• 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 the amount of dividend per share grown over the past?

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

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

Does NZX pass our checks?

NZX has a trailing twelve-month payout ratio of 93.8%, which means that the dividend is not well-covered by its earnings. Going forward, analysts expect NZX’s payout to remain around the same level at 101% of its earnings, which leads to a dividend yield of 5.8%. In addition to this, EPS is forecasted to fall to NZ$0.052 in the upcoming year.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, NZX has a yield of 5.6%, which is high for Capital Markets stocks but still below the market’s top dividend payers.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in NZX for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. I’ve put together three relevant aspects you should look at:

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

2. Valuation: What is NZX 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 NZX 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.