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Have you been keeping an eye on Imperial Brands PLC’s (LON:IMB) upcoming dividend of UK£0.28 per share payable on the 28 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 23 August 2018. Should you diversify into Imperial Brands and boost your portfolio income stream? Well, keep on reading because today, 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 Imperial Brands

How I analyze 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 it paid dividend every year without dramatically reducing payout in the past?

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

• Is is able to pay the current rate of dividends from its earnings?

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

Does Imperial Brands pass our checks?

Imperial Brands has a trailing twelve-month payout ratio of 136.79%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 75.69%, leading to a dividend yield of around 6.93%. In addition to this, EPS should increase to £1.67, 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. Although IMB’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, Imperial Brands has a yield of 5.71%, which is high for Tobacco stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Imperial Brands is definitely worth considering for investors looking to build a dedicated income portfolio. 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 fundamental factors you should further research:

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

2. Valuation: What is IMB 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 IMB 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.

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.