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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, PTC India Financial Services Limited (NSE:PFS) has paid a dividend to shareholders. It currently yields 1.3%. Should it have a place in your portfolio? Let’s take a look at India Financial Services in more detail.
Check out our latest analysis for India Financial Services
Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Will the company be able to keep paying dividend based on the future earnings growth?
How does India Financial Services fare?
India Financial Services has a trailing twelve-month payout ratio of 52%, 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.
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 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. Unfortunately, it is really too early to view India Financial Services as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, India Financial Services has a yield of 1.3%, which is on the low-side for Capital Markets stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in India Financial Services 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three important factors you should look at: