Is Buying Yirendai Ltd (NYSE:YRD) For Its Upcoming $0.28 Dividend A Good Choice?

On the 15 May 2018, Yirendai Ltd (NYSE:YRD) will be paying shareholders an upcoming dividend amount of CN¥0.28 per share. However, investors must have bought the company’s stock before 27 April 2018 in order to qualify for the payment. That means you have only 3 days left! Is this future income a persuasive enough catalyst for investors to think about Yirendai as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. See our latest analysis for Yirendai

5 questions I ask before picking a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

  • Is it the top 25% annual dividend yield payer?
  • 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?
  • Does earnings amply cover its dividend payments?
  • Will it have the ability to keep paying its dividends going forward?

NYSE:YRD Historical Dividend Yield Apr 23rd 18
NYSE:YRD Historical Dividend Yield Apr 23rd 18

Does Yirendai pass our checks?

The current trailing twelve-month payout ratio for the stock is 8.17%, which means that the dividend is covered by earnings. Going forward, analysts expect YRD’s payout to increase to 13.39% of its earnings, which leads to a dividend yield of 1.99%. Moreover, 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 dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Yirendai 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. Compared to its peers, Yirendai has a yield of 1.63%, which is on the low-side for Consumer Finance stocks.

Next Steps:

Whilst there are few things you may like about Yirendai 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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three essential factors you should look at:

  1. 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.
  2. 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.
  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.