Why Emera Incorporated (TSE:EMA) Is A Top Dividend Stock

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Emera Incorporated (TSE:EMA) has pleased shareholders over the past 10 years, by paying out dividends. The company is currently worth CA$11b, and now yields roughly 5.1%. Does Emera tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.

Check out our latest analysis for Emera

How I analyze a dividend stock

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

• Is its annual yield among the top 25% of dividend-paying companies?
• Has it paid dividend every year without dramatically reducing payout in the past?
• 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 Emera fit our criteria?

Emera has a trailing twelve-month payout ratio of 75%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect EMA's payout to increase to 86% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 5.3%. However, EPS is forecasted to fall to CA$2.86 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

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 there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. EMA has increased its DPS from CA$1.01 to CA$2.35 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes EMA a true dividend rockstar.

Relative to peers, Emera produces a yield of 5.1%, which is high for Electric Utilities stocks but still below the market's top dividend payers.

Next Steps:

With these dividend metrics in mind, I definitely rank Emera as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. Below, I've compiled three essential aspects you should further research:

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.