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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Over the past 2 years, InterGlobe Aviation Limited (NSEI:INDIGO) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at InterGlobe Aviation in more detail. View our latest analysis for InterGlobe Aviation

5 questions to ask before buying 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 it increased its dividend per share amount over the past?

• Is it able 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 well does InterGlobe Aviation fit our criteria?

InterGlobe Aviation has a trailing twelve-month payout ratio of 65.42%, which means that the dividend is covered by earnings. However, going forward, analysts expect INDIGO’s payout to fall to 42.61% of its earnings, which leads to a dividend yield of around 2.95%. However, EPS should increase to ₹73, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view InterGlobe Aviation as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, InterGlobe Aviation produces a yield of 2.70%, which is high for Airlines stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then InterGlobe Aviation is a complicated choice since it has some positive aspects as well as negative ones. 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, 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. There are three pertinent aspects you should further research:

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

• 2. Valuation: What is INDIGO 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 INDIGO 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.