Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. CSR Limited (ASX:CSR) has returned to shareholders over the past 10 years, an average dividend yield of 5.00% annually. Let’s dig deeper into whether CSR should have a place in your portfolio. Check out our latest analysis for CSR

Here’s how I find good dividend stocks

When researching a dividend stock, I always follow the following screening criteria:

• Is their annual yield among the top 25% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share risen in the past couple of years?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

How does CSR fare?

The current trailing twelve-month payout ratio for the stock is 73.26%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 70.68%, leading to a dividend yield of 4.23%. Furthermore, EPS should increase to A$0.37. 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. Not only have dividend payouts from CSR fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. Compared to its peers, CSR has a yield of 4.69%, which is high for Basic Materials stocks but still below the market’s top dividend payers.

Next Steps:

If CSR is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three relevant factors you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for CSR’s future growth? Take a look at our free research report of analyst consensus for CSR’s outlook.

2. Valuation: What is CSR 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 CSR is currently mispriced by the market.

3. 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 pass 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.