Investors who want to cash in on DBS Group Holdings Ltd's (SGX:D05) upcoming dividend of S$0.60 per share have only 3 days left to buy the shares before its ex-dividend date, 02 May 2019, in time for dividends payable on the 17 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine DBS Group Holdings's latest financial data to analyse its dividend characteristics.

See our latest analysis for DBS Group Holdings

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

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

• Does earnings amply cover its dividend payments?

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

How does DBS Group Holdings fare?

DBS Group Holdings has a trailing twelve-month payout ratio of 56%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 50% which, assuming the share price stays the same, leads to a dividend yield of around 4.7%. However, EPS should increase to SGD2.37, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

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. In the case of D05 it has increased its DPS from SGD0.56 to SGD1.2 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes D05 a true dividend rockstar.

In terms of its peers, DBS Group Holdings generates a yield of 4.4%, which is high for Banks stocks but still below the market's top dividend payers.

Next Steps:

With these dividend metrics in mind, I definitely rank DBS Group Holdings as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 relevant aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for D05’s future growth? Take a look at our free research report of analyst consensus for D05’s outlook.

2. Valuation: What is D05 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 D05 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.