Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Allied Properties (H.K.) Limited (HKG:56) has been paying a dividend to shareholders. Today it yields 4.4%. Does Allied Properties (H.K.) tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Allied Properties (H.K.)
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Allied Properties (H.K.) fit our criteria?
The current trailing twelve-month payout ratio for the stock is 15%, meaning the dividend is sufficiently 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 you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Allied Properties (H.K.) has a yield of 4.4%, which is on the low-side for Consumer Finance stocks.
Next Steps:
If Allied Properties (H.K.) 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important factors you should further examine: