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Attention dividend hunters! Oil India Limited (NSE:OIL) will be distributing its dividend of ₹1.00 per share on the 21 October 2018, and will start trading ex-dividend in 4 days time on the 12 September 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Oil India can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
View our latest analysis for Oil India
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has the amount of dividend per share grown over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Oil India pass our checks?
The current trailing twelve-month payout ratio for the stock is 43.2%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 39.4%, leading to a dividend yield of 5.8%. Moreover, EPS should increase to ₹30.91.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Oil India 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, Oil India generates a yield of 5.0%, which is high for Oil and Gas stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Oil India is definitely worth considering for investors looking to build a dedicated income portfolio. 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. I’ve put together three essential factors you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for OIL’s future growth? Take a look at our free research report of analyst consensus for OIL’s outlook.
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Valuation: What is OIL 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 OIL is currently mispriced by the market.
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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.