Important news for shareholders and potential investors in Adecco Group AG (VTX:ADEN): The dividend payment of €2.50 per share will be distributed to shareholders on 25 April 2019, and the stock will begin trading ex-dividend at an earlier date, 23 April 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Adecco Group's latest financial data to analyse its dividend characteristics.

View our latest analysis for Adecco Group

5 checks you should do on a dividend stock

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

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

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has it increased its dividend per share amount over the past?

• Is its earnings sufficient to payout dividend at the current rate?

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

How does Adecco Group fare?

The current trailing twelve-month payout ratio for the stock is 80%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 50% which, assuming the share price stays the same, leads to a dividend yield of 4.5%. However, EPS should increase to €3.82, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider 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.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Although ADEN's per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

In terms of its peers, Adecco Group generates a yield of 4.2%, which is high for Professional Services stocks.

Next Steps:

With this in mind, I definitely rank Adecco Group as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 relevant aspects you should further examine:

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

2. Valuation: What is ADEN 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 ADEN 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.