Over the past 10 years Tata Sponge Iron Limited (NSE:TATASPONGE) has been paying dividends to shareholders. The company currently pays out a dividend yield of 2.7% to shareholders, making it a relatively attractive dividend stock. Let’s dig deeper into whether Tata Sponge Iron should have a place in your portfolio.
View our latest analysis for Tata Sponge Iron
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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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 be able to continue to payout at the current rate in the future?
How does Tata Sponge Iron fare?
Tata Sponge Iron has a trailing twelve-month payout ratio of 20%, 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.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of TATASPONGE it has increased its DPS from ₹7 to ₹20 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes TATASPONGE a true dividend rockstar.
Compared to its peers, Tata Sponge Iron has a yield of 2.7%, which is on the low-side for Metals and Mining stocks.
Next Steps:
With this in mind, I definitely rank Tata Sponge Iron 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. There are three important factors you should further research:
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Future Outlook: What are well-informed industry analysts predicting for TATASPONGE’s future growth? Take a look at our free research report of analyst consensus for TATASPONGE’s outlook.
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Valuation: What is TATASPONGE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TATASPONGE is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.