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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, West Coast Paper Mills Limited (NSE:WSTCSTPAPR) has paid a dividend to shareholders. It currently yields 1.8%. Should it have a place in your portfolio? Let’s take a look at West Coast Paper Mills in more detail.

Check out our latest analysis for West Coast Paper Mills

Here’s how I find good dividend stocks

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

• Is it paying an annual yield above 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 is able to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

Does West Coast Paper Mills pass our checks?

West Coast Paper Mills has a trailing twelve-month payout ratio of 12%, which means that the dividend is covered by earnings. However, going forward, analysts expect WSTCSTPAPR’s payout to fall to 8.4% of its earnings. Assuming a constant share price, this equates to a dividend yield of 1.8%. However, EPS should increase to ₹42.1, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

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.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.

In terms of its peers, West Coast Paper Mills generates a yield of 1.8%, which is high for Forestry stocks but still below the market’s top dividend payers.

Next Steps:

With these dividend metrics in mind, I definitely rank West Coast Paper Mills as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that 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. There are three relevant factors you should look at:

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

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

3. Other 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. On rare occasion, data errors may occur. Thank you for reading.