Investors who want to cash in on CLP Holdings Limited’s (HKG:2) upcoming dividend of HK$1.19 per share have only 4 days left to buy the shares before its ex-dividend date, 08 March 2019, in time for dividends payable on the 21 March 2019. Should you diversify into CLP Holdings and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
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 it paying an annual yield above 75% of dividend payers?
- 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 is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does CLP Holdings fit our criteria?
The current trailing twelve-month payout ratio for the stock is 56%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 67% which, assuming the share price stays the same, leads to a dividend yield of 3.4%. However, EPS is forecasted to fall to HK$5.03 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
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 there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Compared to its peers, CLP Holdings has a yield of 3.2%, which is on the low-side for Electric Utilities stocks.
With these dividend metrics in mind, I definitely rank CLP Holdings as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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 important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 2’s future growth? Take a look at our free research report of analyst consensus for 2’s outlook.
- Valuation: What is 2 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 2 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.