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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Sintex Industries Limited (NSE:SINTEX) has been paying a dividend to shareholders. Today it yields 1.2%. Does Sintex Industries tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
See our latest analysis for Sintex Industries
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key 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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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
How does Sintex Industries fare?
The company currently pays out 3.5% 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. Not only have dividend payouts from Sintex Industries fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Sintex Industries produces a yield of 1.2%, which is high for Luxury stocks but still below the market's top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Sintex Industries for the dividend. 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. I've put together three essential factors you should further examine: