China Yuchai International Limited (NYSE:CYD) is a true Dividend Rock Star. Its yield of 5.8% makes it one of the market’s top dividend payer. In the past ten years, China Yuchai International has also grown its dividend from CN¥0.68 to CN¥5.82. Below, I have outlined more attractive dividend aspects for China Yuchai International for income investors who may be interested in new dividend stocks for their portfolio.
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:
- It is paying an annual yield above 75% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its dividend per share amount has increased over the past
- It can afford 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
China Yuchai International’s yield sits at 5.8%, which is high for Machinery stocks. But the real reason China Yuchai International stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.
Reliability 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. CYD has increased its DPS from CN¥0.68 to CN¥5.82 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. This is an impressive feat, which makes CYD a true dividend rockstar.
The company currently pays out 37% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CYD’s payout to increase to 57% of its earnings. Assuming a constant share price, this equates to a dividend yield of 9.8%. In addition to this, EPS should increase to CN¥19.55. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
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.
China Yuchai International ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. 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. I’ve put together three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for CYD’s future growth? Take a look at our free research report of analyst consensus for CYD’s outlook.
- Valuation: What is CYD 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 CYD 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.