A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the past 7 years Kingworld Medicines Group Limited (HKG:1110) has returned an average of 2.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Kingworld Medicines Group should have a place in your portfolio.

Check out our latest analysis for Kingworld Medicines Group

5 questions to ask before buying a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is their annual yield among the top 25% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has dividend per share risen in the past couple of years?

• Is is able to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How well does Kingworld Medicines Group fit our criteria?

The company currently pays out 34.99% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, 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 Kingworld Medicines Group as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Kingworld Medicines Group generates a yield of 4.13%, which is high for Healthcare stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Kingworld Medicines Group’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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. I’ve put together three essential factors you should further examine: