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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. VRL Logistics Limited (NSE:VRLLOG) has paid a dividend to shareholders in the last few years. It currently yields 1.3%. Should it have a place in your portfolio? Let’s take a look at VRL Logistics in more detail.
View our latest analysis for VRL Logistics
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share amount increased over the past?
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Does earnings amply cover its dividend payments?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does VRL Logistics fit our criteria?
The current payout ratio for VRLLOG is negative, which is not great.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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 VRL Logistics as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, VRL Logistics has a yield of 1.3%, which is on the low-side for Transportation stocks.
Next Steps:
After digging a little deeper into VRL Logistics’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. There are three essential aspects you should look at:
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Future Outlook: What are well-informed industry analysts predicting for VRLLOG’s future growth? Take a look at our free research report of analyst consensus for VRLLOG’s outlook.
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Historical Performance: What has VRLLOG’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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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.