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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 4 years China Galaxy Securities Co Ltd. (SEHK:6881) has returned an average of 3.00% per year to investors in the form of dividend payouts. Does China Galaxy Securities tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for China Galaxy Securities
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is it paying an annual yield above 75% of dividend payers?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has the amount of dividend per share grown over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it have the ability to keep paying its dividends going forward?
How does China Galaxy Securities fare?
The company currently pays out 30.32% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 29.70%, leading to a dividend yield of 3.83%. Moreover, EPS is forecasted to fall to CN¥0.5 in the upcoming year. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider China Galaxy Securities as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, China Galaxy Securities has a yield of 3.24%, which is high for Capital Markets stocks.
Next Steps:
With this in mind, I definitely rank China Galaxy Securities as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 relevant aspects you should further examine:
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1. Future Outlook: What are well-informed industry analysts predicting for 6881’s future growth? Take a look at our free research report of analyst consensus for 6881’s outlook.
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2. Valuation: What is 6881 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 6881 is currently mispriced by the market.
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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.