Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. One Point One Solutions Limited (NSE:ONEPOINT) has begun paying dividends recently. It now yields 1.1%. Let’s dig deeper into whether One Point One Solutions should have a place in your portfolio.
View our latest analysis for One Point One Solutions
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has it increased its dividend per share amount over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it have the ability to keep paying its dividends going forward?
How does One Point One Solutions fare?
The current trailing twelve-month payout ratio for the stock is 6.3%, 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 assessing the forecast sustainability of a dividend it is also worth considering 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’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view One Point One Solutions as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether ONEPOINT one as a stable dividend player.
Compared to its peers, One Point One Solutions produces a yield of 1.1%, which is on the low-side for IT stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in One Point One Solutions for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three key aspects you should further research: