Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Over the past 10 years, Hongkong Chinese Limited (HKG:655) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Does Hongkong Chinese tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Hongkong Chinese fare?
Hongkong Chinese has a trailing twelve-month payout ratio of 12.23%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
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. Dividend payments from Hongkong Chinese have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Hongkong Chinese produces a yield of 1.56%, which is on the low-side for Real Estate stocks.
Now you know to keep in mind the reason why investors should be careful investing in Hongkong Chinese for the dividend. 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, 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 key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 655’s future growth? Take a look at our free research report of analyst consensus for 655’s outlook.
- Valuation: What is 655 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 655 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 pass 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.