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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, Nitin Spinners Limited (NSE:NITINSPIN) has paid a dividend to shareholders. It currently yields 1.3%. Let’s dig deeper into whether Nitin Spinners should have a place in your portfolio.
Check out our latest analysis for Nitin Spinners
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Nitin Spinners fare?
The current trailing twelve-month payout ratio for the stock is 10%, meaning the dividend is sufficiently 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 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 Nitin Spinners as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Nitin Spinners has a yield of 1.3%, which is high for Luxury stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into Nitin Spinners’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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. I’ve put together three fundamental factors you should further examine: