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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Talwalkars Better Value Fitness Limited (NSE:TALWALKARS) has paid a dividend to shareholders. It currently yields 1.1%. Does Talwalkars Better Value Fitness tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

Check out our latest analysis for Talwalkars Better Value Fitness

5 questions to ask before buying a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is it paying an annual yield above 75% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

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

• Does earnings amply cover its dividend payments?

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

Does Talwalkars Better Value Fitness pass our checks?

Talwalkars Better Value Fitness has a trailing twelve-month payout ratio of 11%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

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. The reality is that it is too early to consider Talwalkars Better Value Fitness 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.

In terms of its peers, Talwalkars Better Value Fitness generates a yield of 1.1%, which is high for Hospitality stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Talwalkars Better Value Fitness’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, 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. There are three pertinent aspects you should look at: