Important news for shareholders and potential investors in Severfield plc (LON:SFR): The dividend payment of UK£0.034 per share will be distributed into shareholder on 14 September 2018, and the stock will begin trading ex-dividend at an earlier date, 16 August 2018. Is this future income a persuasive enough catalyst for investors to think about Severfield as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.

See our latest analysis for Severfield

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 the top 25% annual dividend yield payer?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has dividend per share risen in the past couple of years?

• Does earnings amply cover its dividend payments?

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

How does Severfield fare?

Severfield has a trailing twelve-month payout ratio of 42.94%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 42.72%, leading to a dividend yield of 3.58%. Moreover, EPS should increase to £0.063.

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. Dividend payments from Severfield have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.

In terms of its peers, Severfield has a yield of 3.03%, which is on the low-side for Construction stocks.

Next Steps:

If Severfield 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. Below, I’ve compiled three important aspects you should look at:

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

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

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 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.