A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Clearwater Seafoods Incorporated (TSE:CLR) has paid dividends to shareholders, and these days it yields 3.7%. Does Clearwater Seafoods tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

Check out our latest analysis for Clearwater Seafoods

5 checks you should do on a dividend stock

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

• Is their annual yield among the top 25% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has the amount of dividend per share grown over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it be able to continue to payout at the current rate in the future?

How does Clearwater Seafoods fare?

The current payout ratio for CLR is negative, which is not great.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

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. Unfortunately, it is really too early to view Clearwater Seafoods as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, Clearwater Seafoods produces a yield of 3.7%, which is high for Food stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Clearwater Seafoods’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, 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. Below, I’ve compiled three key aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for CLR’s future growth? Take a look at our free research report of analyst consensus for CLR’s outlook.

2. Valuation: What is CLR 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 CLR is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger 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 editorial-team@simplywallst.com. 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.