A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. LCI Industries (NYSE:LCII) has returned to shareholders over the past 4 years, an average dividend yield of 2.00% annually. Should it have a place in your portfolio? Let’s take a look at LCI Industries in more detail. View our latest analysis for LCI Industries

Here’s how I find good dividend stocks

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?

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

• Has the amount of dividend per share grown over the past?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

How does LCI Industries fare?

The company currently pays out 38.60% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect LCII’s payout to fall to 0.071% of its earnings, which leads to a dividend yield of 1.72%. However, EPS should increase to $7.67, 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. The reality is that it is too early to consider LCI Industries 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. In terms of its peers, LCI Industries has a yield of 2.40%, which is high for Auto Components stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then LCI Industries 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three key aspects you should look at:

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

2. Valuation: What is LCII 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 LCII 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.