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Attention dividend hunters! Bharat Electronics Limited (NSE:BEL) will be distributing its dividend of ₹0.40 per share on the 25 October 2018, and will start trading ex-dividend in 2 days time on the 20 August 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Bharat Electronics can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

View our latest analysis for Bharat Electronics

5 checks you should use to assess 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 dividend per share amount increased over the past?

• Can it afford to pay the current rate of dividends from its earnings?

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

How well does Bharat Electronics fit our criteria?

The current trailing twelve-month payout ratio for the stock is 34.32%, which means that the dividend is covered by earnings. Going forward, analysts expect BEL’s payout to remain around the same level at 32.68% of its earnings, which leads to a dividend yield of 1.95%. In addition to this, EPS should increase to ₹6.13.

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. Although BEL’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.

Compared to its peers, Bharat Electronics generates a yield of 1.70%, which is on the low-side for Aerospace & Defense stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Bharat Electronics is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. There are three fundamental factors you should look at:

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

2. Valuation: What is BEL 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 BEL is currently mispriced by the market.

3. Other 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.