A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Carpenter Tan Holdings Limited (HKG:837) has paid a dividend to shareholders. It currently yields 6.1%. Does Carpenter Tan Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for Carpenter Tan Holdings

Here’s how I find good dividend stocks

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

• Is it the top 25% annual dividend yield payer?

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

• Has it increased its dividend per share amount over the past?

• Can it afford 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 does Carpenter Tan Holdings fare?

The company currently pays out 52% 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 you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Carpenter Tan Holdings as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Carpenter Tan Holdings has a yield of 6.1%, which is high for Luxury stocks.

Next Steps:

If you are building an income portfolio, then Carpenter Tan Holdings is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. There are three important factors you should further examine: