A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Recently, Lotus Eye Hospital and Institute Limited (NSE:LEHIL) has started paying dividends to shareholders. Today it yields 1.9%. Should it have a place in your portfolio? Let’s take a look at Lotus Eye Hospital and Institute in more detail.
View our latest analysis for Lotus Eye Hospital and Institute
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is their annual yield among the top 25% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has it increased its dividend per share amount over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Will it be able to continue to payout at the current rate in the future?
How well does Lotus Eye Hospital and Institute fit our criteria?
Lotus Eye Hospital and Institute has a trailing twelve-month payout ratio of 72.4%, 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 assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Lotus Eye Hospital and Institute as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
Compared to its peers, Lotus Eye Hospital and Institute produces a yield of 1.9%, which is high for Healthcare stocks.
Next Steps:
If Lotus Eye Hospital and Institute is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant factors you should further research: