Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Henderson Land Development Company Limited (HKG:12) has paid dividends to shareholders, and these days it yields 3.9%. Should it have a place in your portfolio? Let’s take a look at Henderson Land Development in more detail.
See our latest analysis for Henderson Land Development
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Is their annual yield among the top 25% 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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Will it have the ability to keep paying its dividends going forward?
Does Henderson Land Development pass our checks?
Henderson Land Development has a trailing twelve-month payout ratio of 22%, which means that the dividend is covered by earnings. Going forward, analysts expect 12’s payout to increase to 26% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.7%. However, EPS is forecasted to fall to HK$4.21 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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.
Relative to peers, Henderson Land Development has a yield of 3.9%, which is on the low-side for Real Estate stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Henderson Land Development as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. Below, I’ve compiled three essential aspects you should further research: