Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Recently, Reliance Nippon Life Asset Management Limited (NSEI:RNAM) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Reliance Nippon Life Asset Management in more detail. See our latest analysis for Reliance Nippon Life Asset Management
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is its annual yield among the top 25% of dividend-paying companies?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has it increased its dividend per share amount over the past?
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Is it able to pay the current rate of dividends from its earnings?
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Will the company be able to keep paying dividend based on the future earnings growth?
How does Reliance Nippon Life Asset Management fare?
The company currently pays out 68.73% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 79.97%, leading to a dividend yield of 3.28%. In addition to this, EPS should increase to ₹9.8. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Reliance Nippon Life Asset Management 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 RNAM one as a stable dividend player. Compared to its peers, Reliance Nippon Life Asset Management generates a yield of 2.42%, which is high for Capital Markets stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Reliance Nippon Life Asset Management 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 relevant aspects you should look at: