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Have you been keeping an eye on American Shipping Company ASA’s (OB:AMSC) upcoming dividend of US$8.00 per share payable on the 07 September 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 29 August 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine American Shipping’s latest financial data to analyse its dividend characteristics.

View our latest analysis for American Shipping

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• 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 dividend per share amount increased 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 American Shipping fit our criteria?

American Shipping has a trailing twelve-month payout ratio of 101%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a payout ratio of 99.7%, leading to a dividend yield of 9.7%. Moreover, EPS is forecasted to fall to $0.16 in the upcoming year.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view American Shipping as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, American Shipping has a yield of 9.2%, which is high for Shipping stocks.

Next Steps:

After digging a little deeper into American Shipping’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 AMSC’s future growth? Take a look at our free research report of analyst consensus for AMSC’s outlook.

2. Valuation: What is AMSC 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 AMSC 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 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.