China Communications Construction Company Limited (HKG:1800) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 3.3% to shareholders, making it a relatively attractive dividend stock. Does China Communications Construction tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount 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 China Communications Construction fare?
China Communications Construction has a trailing twelve-month payout ratio of 19%, which means that the dividend is covered by earnings. Going forward, analysts expect 1800’s payout to remain around the same level at 19% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.8%. Furthermore, EPS should increase to CN¥1.37.
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. In the case of 1800 it has increased its DPS from CN¥0.088 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. This is an impressive feat, which makes 1800 a true dividend rockstar.
Compared to its peers, China Communications Construction generates a yield of 3.3%, which is on the low-side for Construction stocks.
Taking into account the dividend metrics, China Communications Construction ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. There are three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 1800’s future growth? Take a look at our free research report of analyst consensus for 1800’s outlook.
- Valuation: What is 1800 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 1800 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.
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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.