Is Industrial and Commercial Bank of China Limited (HKG:1398) A Smart Choice For Dividend Investors?
There is a lot to be liked about Industrial and Commercial Bank of China Limited (HKG:1398) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 5.0% to shareholders, making it a relatively attractive dividend stock. Let's dig deeper into whether Industrial and Commercial Bank of China should have a place in your portfolio.
Check out our latest analysis for Industrial and Commercial Bank of China
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- 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?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How does Industrial and Commercial Bank of China fare?
The company currently pays out 29% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 30%, leading to a dividend yield of around 5.8%. Furthermore, EPS should increase to CN¥0.89.
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.
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. In the case of 1398 it has increased its DPS from CN¥0.13 to CN¥0.24 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. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Industrial and Commercial Bank of China produces a yield of 5.0%, which is on the low-side for Banks stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Industrial and Commercial Bank of China 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 pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 1398’s future growth? Take a look at our free research report of analyst consensus for 1398’s outlook.
- Valuation: What is 1398 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 1398 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.
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.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.