If you are interested in cashing in on Student Transportation Inc’s (TSX:STB) upcoming dividend of $0.04 per share, you only have 3 days left to buy the shares before its ex-dividend date, 30 May 2018, in time for dividends payable on the 15 June 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Student Transportation’s most recent financial data to examine its dividend characteristics in more detail. Check out our latest analysis for Student Transportation

5 questions I ask before picking a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

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

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

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

Does Student Transportation pass our checks?

The current trailing twelve-month payout ratio for STB is 154.53%, which means that the dividend is not well-covered by its 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 Student Transportation 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, Student Transportation produces a yield of 5.57%, which is high for Transportation stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Student Transportation 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, 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. There are three important aspects you should further research:

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

2. Valuation: What is STB 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 STB 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 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.