Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Recently, APAC Realty Limited (SGX:CLN) has started paying dividends to shareholders. Today it yields 8.0%. Should it have a place in your portfolio? Let’s take a look at APAC Realty in more detail.
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Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does APAC Realty fit our criteria?
APAC Realty has a trailing twelve-month payout ratio of 51%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 63% which, assuming the share price stays the same, leads to a dividend yield of 7.4%. However, EPS is forecasted to fall to SGD0.061 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. 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. Unfortunately, it is really too early to view APAC Realty as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
Relative to peers, APAC Realty has a yield of 8.0%, which is high for Real Estate stocks.
With these dividend metrics in mind, I definitely rank APAC Realty 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. Below, I’ve compiled three fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for CLN’s future growth? Take a look at our free research report of analyst consensus for CLN’s outlook.
- Valuation: What is CLN 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 CLN 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 email@example.com.