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Attention dividend hunters! Chip Eng Seng Corporation Ltd (SGX:C29) will be distributing its dividend of S$0.04 per share on the 23 May 2019, and will start trading ex-dividend in 4 days time on the 07 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Chip Eng Seng’s latest financial data to analyse its dividend attributes.
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 their annual yield among the top 25% 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 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 does Chip Eng Seng fare?
Chip Eng Seng has a trailing twelve-month payout ratio of 40%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 81% which, assuming the share price stays the same, leads to a dividend yield of 5.1%. However, EPS is forecasted to fall to SGD0.060 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
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. 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. Unfortunately, it is really too early to view Chip Eng Seng as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Chip Eng Seng produces a yield of 5.1%, which is high for Real Estate stocks but still below the market’s top dividend payers.
Whilst there are few things you may like about Chip Eng Seng from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three important aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for C29’s future growth? Take a look at our free research report of analyst consensus for C29’s outlook.
- Historical Performance: What has C29’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.