Attention dividend hunters! Ameren Corporation (NYSE:AEE) will be distributing its dividend of US$0.46 per share on the 28 September 2018, and will start trading ex-dividend in 4 days time on the 11 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Ameren’s latest financial data to analyse its dividend attributes.

See our latest analysis for Ameren

How I analyze a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is it the top 25% annual dividend yield payer?

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

• Has the amount of dividend per share grown over the past?

• Is is able 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 does Ameren fare?

The current trailing twelve-month payout ratio for the stock is 71.3%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect AEE’s payout to fall to 59.5% of its earnings, which leads to a dividend yield of 3.1%. However, EPS should increase to $3.26, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

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 Ameren 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.

Relative to peers, Ameren has a yield of 2.9%, which is on the low-side for Integrated Utilities stocks.

Next Steps:

If you are building an income portfolio, then Ameren is a complicated choice since it has some positive aspects as well as negative ones. 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three fundamental factors you should look at:

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

2. Valuation: What is AEE 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 AEE 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.