If you are an income investor, then Castrol India Limited (NSE:CASTROLIND) should be on your radar. Castrol India Limited manufactures and markets automotive and industrial lubricants, and provides related services primarily in India. Over the past 10 years, the ₹158b market cap company has been growing its dividend payments, from ₹1.88 to ₹5. Currently yielding 3.1%, let’s take a closer look at Castrol India’s dividend profile.
What Is A Dividend Rock Star?
It is a stock that pays a consistent, reliable and competitive dividend over a long period of time, and is expected to continue to pay in the same manner many years to come. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its has increased its dividend per share amount over the past
- It is able to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
Castrol India currently yields 3.1%, which is high for Chemicals stocks. But the real reason Castrol India stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you’re investor who wants a robust cash inflow from your portfolio over a long period of time.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. CASTROLIND has increased its DPS from ₹1.88 to ₹5 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Castrol India has a trailing twelve-month payout ratio of 70%, which means that the dividend is covered by earnings. Going forward, analysts expect CASTROLIND’s payout to remain around the same level at 74% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.8%. In addition to this, EPS should increase to ₹7.7.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
With Castrol India producing strong dividend income for your portfolio over the past few years, you can take comfort in knowing that this stock will still continue to be a top dividend generator moving forward. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CASTROLIND’s future growth? Take a look at our free research report of analyst consensus for CASTROLIND’s outlook.
- Valuation: What is CASTROLIND 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 CASTROLIND is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.