Important news for shareholders and potential investors in Schaffer Corporation Limited (ASX:SFC): The dividend payment of A$0.15 per share will be distributed into shareholder on 16 March 2018, and the stock will begin trading ex-dividend at an earlier date, 08 March 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Schaffer’s latest financial data to analyse its dividend characteristics. See our latest analysis for Schaffer

5 questions I ask before picking a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

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

How well does Schaffer fit our criteria?

Schaffer has a trailing twelve-month payout ratio of 36.78%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Schaffer fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends. Compared to its peers, Schaffer generates a yield of 2.34%, which is high for Auto Components stocks but still below the low risk savings rate.

Next Steps:

After digging a little deeper into Schaffer’s yield, it’s easy to see why you should be cautious investing in the company just 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental aspects you should look at:

1. Valuation: What is SFC 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 SFC 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 Schaffer’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.