Yahoo Finance Read This Before Buying Caesarstone Ltd (NASDAQ:CSTE) For Its Dividend
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Recently, Caesarstone Ltd (NASDAQ:CSTE) has started paying dividends to shareholders. Today it yields 3.2%. Let’s dig deeper into whether Caesarstone should have a place in your portfolio.
Check out our latest analysis for Caesarstone
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown 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 Caesarstone fit our criteria?
Caesarstone has a negative payout ratio, which means that it is loss-making, and paying its dividend from its retained earnings.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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. The reality is that it is too early to consider Caesarstone as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether CSTE one as a stable dividend player.
In terms of its peers, Caesarstone has a yield of 3.2%, which is high for Building stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into Caesarstone’s yield, it’s easy to see why you should be cautious investing in the company just 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three fundamental factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for CSTE’s future growth? Take a look at our free research report of analyst consensus for CSTE’s outlook.
Valuation: What is CSTE 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 CSTE is currently mispriced by the market.
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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
