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Investors who want to cash in on Zegona Communications plc’s (LON:ZEG) upcoming dividend of €0.028 per share have only 4 days left to buy the shares before its ex-dividend date, 06 December 2018, in time for dividends payable on the 28 December 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Zegona Communications can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

View our latest analysis for Zegona Communications

5 questions I ask before picking a dividend stock

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

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

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

• Has the amount of dividend per share grown 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 Zegona Communications fit our criteria?

The company currently pays out 50% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 85%, leading to a dividend yield of 4.3%.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Zegona Communications as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Zegona Communications produces a yield of 5.3%, which is on the low-side for Telecom stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Zegona Communications is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental factors you should further research:

1. Valuation: What is ZEG 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 ZEG is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Zegona Communications’s board and the CEO’s back ground.

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.