Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Tips Industries Limited (NSE:TIPSINDLTD) has been paying a dividend to shareholders. Today it yields 1.6%. Does Tips Industries tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Tips Industries
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is it paying an annual yield above 75% of dividend payers?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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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 does Tips Industries fare?
The company currently pays out 102% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is not well-covered by its 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 you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. Dividend payments from Tips Industries have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Tips Industries generates a yield of 1.6%, which is high for Entertainment stocks but still below the market’s top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Tips Industries 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, 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 fundamental aspects you should look at: