Only 2 Days Left To Commonwealth Bank of Australia (ASX:CBA)’s Ex-Dividend Date, Should Investors Buy?

Attention dividend hunters! Commonwealth Bank of Australia (ASX:CBA) will be distributing its dividend of AU$2.31 per share on the 28 September 2018, and will start trading ex-dividend in 2 days time on the 15 August 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Commonwealth Bank of Australia’s latest financial data to analyse its dividend attributes.

See our latest analysis for Commonwealth Bank of Australia

5 questions I ask before picking a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• 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 amount increased over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

ASX:CBA Historical Dividend Yield August 12th 18

How well does Commonwealth Bank of Australia fit our criteria?

The current trailing twelve-month payout ratio for the stock is 80.27%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 77.20%, leading to a dividend yield of 5.85%. Moreover, EPS should increase to A$5.68.

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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Commonwealth Bank of Australia produces a yield of 5.71%, which is on the low-side for Banks stocks.

Next Steps:

Taking into account the dividend metrics, Commonwealth Bank of Australia ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three fundamental factors you should look at:

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

2. Valuation: What is CBA 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 CBA 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.

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.