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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Thakral Corporation Ltd (SGX:AWI) has paid dividends to shareholders, and these days it yields 8.9%. Should it have a place in your portfolio? Let’s take a look at Thakral in more detail.

See our latest analysis for Thakral

How I analyze a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is it the top 25% annual dividend yield payer?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share risen in the past couple of years?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

How does Thakral fare?

The company currently pays out 56% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is 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. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

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 Thakral as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, Thakral produces a yield of 8.9%, which is high for Retail Distributors stocks.

Next Steps:

Whilst there are few things you may like about Thakral from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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. Below, I’ve compiled three fundamental aspects you should further research: