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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Vinyl Chemicals (India) Ltd (NSE:VINYLINDIA) has paid a dividend to shareholders. It currently yields 3.1%. Should it have a place in your portfolio? Let’s take a look at Vinyl Chemicals (India) in more detail.
Check out our latest analysis for Vinyl Chemicals (India)
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:
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Is it the top 25% annual dividend yield payer?
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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 the amount of dividend per share grown over the past?
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Does earnings amply cover its dividend payments?
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Will the company be able to keep paying dividend based on the future earnings growth?
How well does Vinyl Chemicals (India) fit our criteria?
Vinyl Chemicals (India) has a trailing twelve-month payout ratio of 38%, 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 considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Vinyl Chemicals (India) as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Vinyl Chemicals (India) produces a yield of 3.1%, which is high for Trade Distributors stocks.
Next Steps:
Taking all the above into account, Vinyl Chemicals (India) is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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, 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. There are three important factors you should further examine: