There is a lot to be liked about Hengan International Group Company Limited (HKG:1044) as an income stock. It has paid dividends over the past 10 years. The company is currently worth HK$78.1b, and now yields roughly 3.9%. Let’s dig deeper into whether Hengan International Group should have a place in your portfolio.
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 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 dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does Hengan International Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 67%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 67%, leading to a dividend yield of 4.3%. Moreover, EPS should increase to CN¥3.49.
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.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of 1044 it has increased its DPS from CN¥0.56 to CN¥2.15 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 1044 a true dividend rockstar.
Relative to peers, Hengan International Group generates a yield of 3.9%, which is on the low-side for Personal Products stocks.
Keeping in mind the dividend characteristics above, Hengan International Group is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 1044’s future growth? Take a look at our free research report of analyst consensus for 1044’s outlook.
- Valuation: What is 1044 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 1044 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 email@example.com.