Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years Four Seas Mercantile Holdings Limited (SEHK:374) has returned an average of 3.00% per year to investors in the form of dividend payouts. Let’s dig deeper into whether Four Seas Mercantile Holdings should have a place in your portfolio. View our latest analysis for Four Seas Mercantile Holdings

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

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

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Is it 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 Four Seas Mercantile Holdings fare?

The current trailing twelve-month payout ratio for the stock is 10.57%, 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 there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. 374 has increased its DPS from HK$0.07 to HK$0.1 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock. Compared to its peers, Four Seas Mercantile Holdings generates a yield of 2.79%, which is high for Food stocks but still below the market’s top dividend payers.

Next Steps:

Considering the dividend attributes we analyzed above, Four Seas Mercantile Holdings is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. Below, I’ve compiled three key factors you should further examine:

1. Valuation: What is 374 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 374 is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Four Seas Mercantile Holdings’s board and the CEO’s back ground.

3. 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 pass 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.