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Shares of Somero Enterprises, Inc. (LON:SOM) will begin trading ex-dividend in 2 days. To qualify for the dividend check of US$0.25 per share, investors must have owned the shares prior to 04 April 2019, which is the last day the company's management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Somero Enterprises's latest financial data to analyse its dividend characteristics.

View our latest analysis for Somero Enterprises

5 checks you should do on a dividend stock

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

• Is their annual yield among the top 25% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

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

• Is its earnings sufficient to payout dividend at the current rate?

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

How well does Somero Enterprises fit our criteria?

The company currently pays out 50% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect SOM's payout to increase to 64% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.3%. Moreover, EPS should increase to $0.40. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. SOM has increased its DPS from $0.060 to $0.19 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. This is an impressive feat, which makes SOM a true dividend rockstar.

Relative to peers, Somero Enterprises has a yield of 4.0%, which is high for Machinery stocks but still below the market's top dividend payers.

Next Steps:

Taking into account the dividend metrics, Somero Enterprises 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, 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 pertinent factors you should look at:

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

2. Valuation: What is SOM 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 SOM 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.