Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Shandong Weigao Group Medical Polymer Company Limited (OTCPK:SHWG.F) has been paying a dividend to shareholders. Today it yields 1.6%. Does Shandong Weigao Group Medical Polymer tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
Does Shandong Weigao Group Medical Polymer pass our checks?
Shandong Weigao Group Medical Polymer has a trailing twelve-month payout ratio of 34%, which means that the dividend is covered by earnings. However, going forward, analysts expect SHWG.F’s payout to fall to 15% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 1.7%. However, EPS should increase to CN¥0.35, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity 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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Shandong Weigao Group Medical Polymer generates a yield of 1.6%, which is high for Medical Equipment stocks but still below the market’s top dividend payers.
With this in mind, I definitely rank Shandong Weigao Group Medical Polymer as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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. I’ve put together three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for SHWG.F’s future growth? Take a look at our free research report of analyst consensus for SHWG.F’s outlook.
- Valuation: What is SHWG.F 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 SHWG.F is currently mispriced by the market.
- 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 email@example.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.