Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. China Display Optoelectronics Technology Holdings Limited (HKG:334) has returned an average dividend yield of 3.00% annually to shareholders. Does China Display Optoelectronics Technology Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View out our latest analysis for China Display Optoelectronics Technology Holdings
5 checks you should do on a dividend stock
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 it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased 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?
Does China Display Optoelectronics Technology Holdings pass our checks?
The company currently pays out 28.95% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect 334’s payout to remain around the same level at 27.78% of its earnings, which leads to a dividend yield of around 3.66%. Furthermore, EPS is forecasted to fall to CN¥0.046 in the upcoming year.
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. Unfortunately, it is really too early to view China Display Optoelectronics Technology Holdings as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.Relative to peers, China Display Optoelectronics Technology Holdings produces a yield of 3.18%, which is on the low-side for Tech stocks.
Taking all the above into account, China Display Optoelectronics Technology Holdings is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three pertinent aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for 334’s future growth? Take a look at our free research report of analyst consensus for 334’s outlook.
- Valuation: What is 334 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 334 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.