Investors who want to cash in on Superdry Plc’s (LON:SDRY) upcoming dividend of UK£0.25 per share have only 4 days left to buy the shares before its ex-dividend date, 11 October 2018, in time for dividends payable on the 14 December 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Superdry’s latest financial data to analyse its dividend characteristics.

See our latest analysis for Superdry

5 questions to ask before buying a dividend stock

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

• Is it paying an annual yield above 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has it increased its dividend per share amount over the past?

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

• Will the company be able to keep paying dividend based on the future earnings growth?

Does Superdry pass our checks?

Superdry has a trailing twelve-month payout ratio of 50%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 35%, leading to a dividend yield of 4.1%. However, EPS should increase to £1.05, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

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 Superdry 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.

Compared to its peers, Superdry produces a yield of 3.1%, which is on the low-side for Specialty Retail stocks.

Next Steps:

If Superdry 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, 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 important factors you should look at: