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Investors who want to cash in on Auswide Bank Ltd’s (ASX:ABA) upcoming dividend of AU$0.18 per share have only 4 days left to buy the shares before its ex-dividend date, 10 September 2018, in time for dividends payable on the 21 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Auswide Bank’s latest financial data to analyse its dividend characteristics.

See our latest analysis for Auswide Bank

Here’s how I find good dividend stocks

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

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

• 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 is able to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

Does Auswide Bank pass our checks?

The company currently pays out 82.2% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 79.5%, leading to a dividend yield of around 6.8%. Moreover, EPS should increase to A$0.45.

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 Auswide Bank fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.

Compared to its peers, Auswide Bank produces a yield of 5.8%, which is high for Mortgage stocks.

Next Steps:

Taking into account the dividend metrics, Auswide Bank ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 essential aspects you should further research:

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

2. Valuation: What is ABA 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 ABA 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.