A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, China Mobile Limited (HKG:941) has been paying a dividend to shareholders. Today it yields 4.5%. Should it have a place in your portfolio? Let’s take a look at China Mobile in more detail.
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- 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 risen in the past couple of years?
- 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?
How well does China Mobile fit our criteria?
The company currently pays out 50% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 941’s payout to remain around the same level at 50% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.3%. Moreover, EPS is forecasted to fall to CN¥5.63 in the upcoming year.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Although 941’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, China Mobile produces a yield of 4.5%, which is on the low-side for Wireless Telecom stocks.
Taking into account the dividend metrics, China Mobile ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 941’s future growth? Take a look at our free research report of analyst consensus for 941’s outlook.
- Valuation: What is 941 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 941 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 firstname.lastname@example.org.