A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Over the past 10 years, Ucal Fuel Systems Limited (NSE:UCALFUEL) has returned an average of 3.00% per year to shareholders in terms of dividend yield. Let’s dig deeper into whether Ucal Fuel Systems should have a place in your portfolio. See our latest analysis for Ucal Fuel Systems

5 questions to ask before buying a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• 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 dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

How well does Ucal Fuel Systems fit our criteria?

Ucal Fuel Systems has a trailing twelve-month payout ratio of 21.85%, 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.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although UCALFUEL’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, Ucal Fuel Systems generates a yield of 4.62%, which is high for Auto Components stocks.

Next Steps:

Taking into account the dividend metrics, Ucal Fuel Systems ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three pertinent factors you should further research:

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

2. Valuation: What is UCALFUEL 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 UCALFUEL 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 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.