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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, CCL Industries Inc. (TSE:CCL.B) has paid a dividend to shareholders. It currently yields 1.0%. Does CCL Industries tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for CCL Industries

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 dividend per share risen in the past couple of years?

• Does earnings amply cover its dividend payments?

• Will the company be able to keep paying dividend based on the future earnings growth?

Does CCL Industries pass our checks?

CCL Industries has a trailing twelve-month payout ratio of 17%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 16% which, assuming the share price stays the same, leads to a dividend yield of around 1.1%. Furthermore, EPS should increase to CA$2.98.

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.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Dividend payments from CCL Industries have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.

Relative to peers, CCL Industries generates a yield of 1.0%, which is on the low-side for Packaging stocks.

Next Steps:

After digging a little deeper into CCL Industries’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three essential aspects you should further examine: