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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, China Hongqiao Group Limited (HKG:1378) has paid a dividend to shareholders. It currently yields 3.3%. Let’s dig deeper into whether China Hongqiao Group should have a place in your portfolio.
Check out our latest analysis for China Hongqiao Group
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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Does it pay an annual yield higher than 75% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share amount increased 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 Hongqiao Group fare?
China Hongqiao Group has a trailing twelve-month payout ratio of 25%, which means that the dividend is covered by earnings. Going forward, analysts expect 1378’s payout to remain around the same level at 25% of its earnings, which leads to a dividend yield of 5.6%. Moreover, EPS should increase to CN¥0.90.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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 Hongqiao Group as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, China Hongqiao Group produces a yield of 3.3%, which is on the low-side for Metals and Mining stocks.
Next Steps:
Taking all the above into account, China Hongqiao Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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, 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. I’ve put together three important factors you should further research: