In This Article:
Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Astra Microwave Products Limited (NSE:ASTRAMICRO) has paid dividends to shareholders, and these days it yields 1.7%. Does Astra Microwave Products tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Astra Microwave Products
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
-
Is it paying an annual yield above 75% of dividend payers?
-
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
-
Has it increased its dividend per share amount over the past?
-
Is its earnings sufficient to payout dividend at the current rate?
-
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Astra Microwave Products fit our criteria?
The current trailing twelve-month payout ratio for the stock is 17%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 13% which, assuming the share price stays the same, leads to a dividend yield of around 1.5%. Furthermore, EPS is also forecasted to fall to ₹3.2 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. 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, Astra Microwave Products produces a yield of 1.7%, which is high for Communications stocks but still below the market’s top dividend payers.
Next Steps:
Considering the dividend attributes we analyzed above, Astra Microwave Products is definitely worth keeping an eye on for someone looking to build a dedicated income 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 essential factors you should further research: