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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, COSCO SHIPPING Ports Limited (HKG:1199) has paid dividends to shareholders, and these days it yields 4.1%. Let’s dig deeper into whether COSCO SHIPPING Ports should have a place in your portfolio.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- 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 the amount of dividend per share grown 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?
Does COSCO SHIPPING Ports pass our checks?
The company currently pays out 39% 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 1199’s payout to remain around the same level at 38% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.9%. Furthermore, EPS should increase to $0.10.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from COSCO SHIPPING Ports 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.
Relative to peers, COSCO SHIPPING Ports produces a yield of 4.1%, which is on the low-side for Infrastructure stocks.
Whilst there are few things you may like about COSCO SHIPPING Ports from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 1199’s future growth? Take a look at our free research report of analyst consensus for 1199’s outlook.
- Valuation: What is 1199 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 1199 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 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.