The Attractive Combination That Could Earn Yantai North Andre Juice Company Limited (HKG:2218) A Place In Your Dividend Portfolio

Today we'll take a closer look at Yantai North Andre Juice Company Limited (HKG:2218) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.

A slim 0.9% yield is hard to get excited about, but the long payment history is respectable. At the right price, or with strong growth opportunities, Yantai North Andre Juice could have potential. Some simple research can reduce the risk of buying Yantai North Andre Juice for its dividend - read on to learn more.

Explore this interactive chart for our latest analysis on Yantai North Andre Juice!

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Looking at the data, we can see that 12% of Yantai North Andre Juice's profits were paid out as dividends in the last 12 months. Given the low payout ratio, it is hard to envision the dividend coming under threat, barring a catastrophe.

While the above analysis focuses on dividends relative to a company's earnings, we do note Yantai North Andre Juice's strong net cash position, which will let it pay larger dividends for a time, should it choose.

We update our data on Yantai North Andre Juice every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. For the purpose of this article, we only scrutinise the last decade of Yantai North Andre Juice's dividend payments. The dividend has been cut on at least one occasion historically. During the past 10-year period, the first annual payment was CN¥0.04 in 2011, compared to CN¥0.05 last year. This works out to be a compound annual growth rate (CAGR) of approximately 3.6% a year over that time. Yantai North Andre Juice's dividend payments have fluctuated, so it hasn't grown 3.6% every year, but the CAGR is a useful rule of thumb for approximating the historical growth.

Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's good to see Yantai North Andre Juice has been growing its earnings per share at 17% a year over the past five years. Earnings per share are growing at a solid clip, and the payout ratio is low. We think this is an ideal combination in a dividend stock.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. We're glad to see Yantai North Andre Juice has a low payout ratio, as this suggests earnings are being reinvested in the business. Next, earnings growth has been good, but unfortunately the dividend has been cut at least once in the past. Yantai North Andre Juice fits all of our criteria, and we think there are a lot of positives to it from a dividend perspective.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Yantai North Andre Juice that investors should know about before committing capital to this stock.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.

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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. 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. Simply Wall St has no position in any stocks mentioned.
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