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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. Historically, Dhampur Sugar Mills Limited (NSE:DHAMPURSUG) has paid dividends to shareholders, and these days it yields 2.0%. Does Dhampur Sugar Mills tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Dhampur Sugar Mills
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is its annual yield among the top 25% of dividend-paying companies?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has the amount of dividend per share grown 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 the company be able to keep paying dividend based on the future earnings growth?
Does Dhampur Sugar Mills pass our checks?
Dhampur Sugar Mills has a trailing twelve-month payout ratio of 16%, meaning the dividend is sufficiently 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 thinking about whether a dividend is sustainable, another factor to consider is the cash flow. 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. The reality is that it is too early to consider Dhampur Sugar Mills as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Dhampur Sugar Mills has a yield of 2.0%, which is high for Food stocks.
Next Steps:
If you are building an income portfolio, then Dhampur Sugar Mills is a complicated choice since it has some positive aspects as well as negative ones. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three pertinent aspects you should further research: