On the 29 March 2018, Adacel Technologies Limited (ASX:ADA) will be paying shareholders an upcoming dividend amount of A$0.02 per share. However, investors must have bought the company’s stock before 15 March 2018 in order to qualify for the payment. That means you have only 4 days left! Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Adacel Technologies’s latest financial data to analyse its dividend characteristics. See our latest analysis for Adacel Technologies

Here’s how I find good dividend stocks

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 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 Adacel Technologies fit our criteria?

Adacel Technologies has a trailing twelve-month payout ratio of 37.22%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 51.40%, leading to a dividend yield of around 2.93%.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Adacel Technologies as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Adacel Technologies produces a yield of 1.86%, which is on the low-side for Software stocks.

Next Steps:

After digging a little deeper into Adacel Technologies’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. 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, 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 fundamental factors you should look at:

1. Valuation: What is ADA 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 ADA is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Adacel Technologies’s board and the CEO’s back ground.

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 pass 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.