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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, Kabra Extrusiontechnik Limited (NSE:KABRAEXTRU) has been paying a dividend to shareholders. Today it yields 2.8%. Should it have a place in your portfolio? Let’s take a look at Kabra Extrusiontechnik in more detail.

View our latest analysis for Kabra Extrusiontechnik

5 questions to ask before buying a dividend stock

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

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

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has it increased its dividend per share amount over the past?

• Is is 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?

Does Kabra Extrusiontechnik pass our checks?

Kabra Extrusiontechnik has a trailing twelve-month payout ratio of 32%, 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 company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. 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.

Relative to peers, Kabra Extrusiontechnik has a yield of 2.8%, which is high for Machinery stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Kabra Extrusiontechnik is definitely worth considering for investors looking to build a dedicated income portfolio. 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 relevant factors you should further research:

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

2. Valuation: What is KABRAEXTRU 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 KABRAEXTRU 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.