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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Thirumalai Chemicals Limited (NSE:TIRUMALCHM) has been paying a dividend to shareholders. Today it yields 2.1%. Let's dig deeper into whether Thirumalai Chemicals should have a place in your portfolio.
See our latest analysis for Thirumalai Chemicals
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is it paying an annual yield above 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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Can it afford to pay the current rate of dividends from its earnings?
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Will it have the ability to keep paying its dividends going forward?
How well does Thirumalai Chemicals fit our criteria?
The company currently pays out 15% of its earnings as a dividend, according to its trailing twelve-month data, 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. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Thirumalai Chemicals produces a yield of 2.1%, which is high for Chemicals stocks.
Next Steps:
With this in mind, I definitely rank Thirumalai Chemicals as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. I've put together three key aspects you should further research: