Shares of Yirendai Ltd (NYSE:YRD) will begin trading ex-dividend in 6 days. To qualify for the dividend check of CN¥0.28 per share, investors must have owned the shares prior to 27 April 2018, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Yirendai’s latest financial data to analyse its dividend attributes. See our latest analysis for Yirendai
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- 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?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Yirendai fit our criteria?The company currently pays out 8.17% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 13.39%, leading to a dividend yield of 1.96%. Furthermore, EPS should increase to CN¥27.12. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Yirendai as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether YRD one as a stable dividend player. In terms of its peers, Yirendai produces a yield of 1.60%, which is on the low-side for Consumer Finance stocks.
If Yirendai is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 essential factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for YRD’s future growth? Take a look at our free research report of analyst consensus for YRD’s outlook.
- Valuation: What is YRD 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 YRD 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.