Read This Before Considering Suncorp Group Limited (ASX:SUN) For Its Upcoming AU$0.26 Dividend

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Have you been keeping an eye on Suncorp Group Limited's (ASX:SUN) upcoming dividend of AU$0.26 per share payable on the 02 April 2019? Then you only have 3 days left before the stock starts trading ex-dividend on the 20 February 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Suncorp Group can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.

View our latest analysis for Suncorp Group

How I analyze a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is it the top 25% annual dividend yield payer?
• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
• Has dividend per share risen in the past couple of years?
• Can it afford to pay the current rate of dividends from its earnings?
• Will it have the ability to keep paying its dividends going forward?

How does Suncorp Group fare?

Suncorp Group has a trailing twelve-month payout ratio of 82%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 77% which, assuming the share price stays the same, leads to a dividend yield of around 5.9%. In addition to this, EPS is forecasted to fall to A$0.60 in the upcoming year.

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.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Dividend payments from Suncorp Group have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.

Compared to its peers, Suncorp Group produces a yield of 5.0%, which is high for Insurance stocks but still below the market's top dividend payers.

Next Steps:

Taking all the above into account, Suncorp Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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 fundamental factors you should further examine:

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

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.