Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Industria REIT (ASX:IDR) has returned to shareholders over the past 4 years, an average dividend yield of 7.00% annually. Does Industria REIT tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Industria REIT

5 checks you should do on a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is it the top 25% annual dividend yield payer?

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

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

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

How well does Industria REIT fit our criteria?

The company currently pays out 30.67% of its earnings as a dividend, according to its trailing twelve-month data, which is rather low compared to other REITs. Generally, REITs are expected to pay out the majority of its earnings to provide a regular income stream for their investors. In the near future, analysts are predicting a higher payout ratio of 96.70%, leading to a dividend yield of 6.86%. However, EPS is forecasted to fall to A$0.19 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio. 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. The reality is that it is too early to consider Industria REIT as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, Industria REIT has a yield of 6.51%, which is high for REITs stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Industria REIT as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. Below, I’ve compiled three essential aspects you should further research:

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

2. Valuation: What is IDR 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 IDR 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.

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.