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Have you been keeping an eye on Convatec Group Plc's (LON:CTEC) upcoming dividend of US$0.031 per share payable on the 16 May 2019? Then you only have 3 days left before the stock starts trading ex-dividend on the 04 April 2019. Is this future income a persuasive enough catalyst for investors to think about Convatec Group as an investment today? Below, 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 Convatec Group

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 its annual yield among the top 25% of dividend-paying companies?

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

• Has dividend per share amount increased over the past?

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

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

How does Convatec Group fare?

Convatec Group has a trailing twelve-month payout ratio of 50%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 42% which, assuming the share price stays the same, leads to a dividend yield of 3.3%. Furthermore, EPS is also forecasted to fall to $0.056 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. 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. The reality is that it is too early to consider Convatec Group as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Convatec Group generates a yield of 3.1%, which is high for Medical Equipment stocks but still below the market's top dividend payers.

Next Steps:

Taking all the above into account, Convatec Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental aspects you should further examine: