Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Orient Refractories Limited (NSE:ORIENTREF) has paid a dividend to shareholders. It currently yields 1.1%. Should it have a place in your portfolio? Let’s take a look at Orient Refractories in more detail.

Check out our latest analysis for Orient Refractories

5 questions I ask before picking a dividend stock

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

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

Does Orient Refractories pass our checks?

The current trailing twelve-month payout ratio for the stock is 33%, 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 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.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Orient Refractories as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Orient Refractories produces a yield of 1.1%, which is high for Basic Materials stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Orient Refractories’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. 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 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 essential aspects you should look at: