Important news for shareholders and potential investors in The Hong Kong and China Gas Company Limited (HKG:3): The dividend payment of HK$0.23 per share will be distributed to shareholders on 13 June 2019, and the stock will begin trading ex-dividend at an earlier date, 30 May 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Hong Kong and China Gas can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
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5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- 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 the amount of dividend per share grown over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
How does Hong Kong and China Gas fare?
The current trailing twelve-month payout ratio for the stock is 58%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 66% which, assuming the share price stays the same, leads to a dividend yield of 2.0%. However, EPS is forecasted to fall to HK$0.59 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
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.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. 3 has increased its DPS from HK$0.15 to HK$0.35 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Hong Kong and China Gas has a yield of 1.8%, which is on the low-side for Gas Utilities stocks.
Keeping in mind the dividend characteristics above, Hong Kong and China Gas is definitely worth considering for investors looking to build a dedicated income portfolio. 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 relevant aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for 3’s future growth? Take a look at our free research report of analyst consensus for 3’s outlook.
- Valuation: What is 3 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 3 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 firstname.lastname@example.org. 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.