There is a lot to be liked about Phillips Carbon Black Limited (NSE:PHILIPCARB) as an income stock. It has paid dividends over the past 10 years. The company is currently worth ₹30b, and now yields roughly 4.0%. Let’s dig deeper into whether Phillips Carbon Black should have a place in your portfolio.

See our latest analysis for Phillips Carbon Black

How I analyze a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

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

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

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

• Is is able to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

How well does Phillips Carbon Black fit our criteria?

Phillips Carbon Black has a trailing twelve-month payout ratio of 18%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 14% which, assuming the share price stays the same, leads to a dividend yield of 2.2%. However, EPS should increase to ₹24.6, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

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. 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, Phillips Carbon Black produces a yield of 4.0%, which is high for Chemicals stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Phillips Carbon Black 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 key aspects you should further examine:

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

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

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.