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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. Best Pacific International Holdings Limited (HKG:2111) has recently paid dividends to shareholders, and currently yields 3.2%. Does Best Pacific International Holdings 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
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased 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 Best Pacific International Holdings pass our checks?
Best Pacific International Holdings has a trailing twelve-month payout ratio of 23%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 25% which, assuming the share price stays the same, leads to a dividend yield of around 4.7%. Furthermore, EPS should increase to HK$0.29. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Best Pacific International Holdings as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Best Pacific International Holdings generates a yield of 3.2%, which is on the low-side for Luxury stocks.
If you are building an income portfolio, then Best Pacific International Holdings is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 essential aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 2111’s future growth? Take a look at our free research report of analyst consensus for 2111’s outlook.
- Valuation: What is 2111 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 2111 is currently mispriced by the market.
- 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 firstname.lastname@example.org.