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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, Karelia Tobacco Company Inc (ATH:KARE) has been paying a dividend to shareholders. Today it yields 3.7%. Let’s dig deeper into whether Karelia Tobacco Company should have a place in your portfolio.
Check out our latest analysis for Karelia Tobacco Company
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is its annual yield among the top 25% of dividend-paying companies?
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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 dividend per share risen in the past couple of years?
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Is its earnings sufficient to payout dividend at the current rate?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Karelia Tobacco Company fare?
Karelia Tobacco Company has a trailing twelve-month payout ratio of 42%, 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.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although KARE’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, Karelia Tobacco Company produces a yield of 3.7%, which is on the low-side for Tobacco stocks.
Next Steps:
If you are building an income portfolio, then Karelia Tobacco Company 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, 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 pertinent factors you should look at: