Investors who want to cash in on Lookers plc's (LON:LOOK) upcoming dividend of UK£0.026 per share have only 3 days left to buy the shares before its ex-dividend date, 25 April 2019, in time for dividends payable on the 05 June 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Lookers's latest financial data to analyse its dividend characteristics.

Check out our latest analysis for Lookers

5 checks you should use to assess 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?

• Does earnings amply cover its dividend payments?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How well does Lookers fit our criteria?

The company currently pays out 37% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect LOOK's payout to remain around the same level at 34% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.7%. Moreover, EPS should increase to £0.11.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

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. The reality is that it is too early to consider Lookers as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, Lookers has a yield of 4.4%, which is high for Specialty Retail stocks but still below the market's top dividend payers.

Next Steps:

Taking all the above into account, Lookers is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 pertinent factors you should look at:

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

2. Valuation: What is LOOK 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 LOOK 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.

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.