A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Chow Tai Fook Jewellery Group Limited (SEHK:1929) has returned to shareholders over the past 6 years, an average dividend yield of 3.00% annually. Does Chow Tai Fook Jewellery Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Chow Tai Fook Jewellery Group

5 checks you should use to assess a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is their annual yield among the top 25% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

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

• Is it able 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?

Does Chow Tai Fook Jewellery Group pass our checks?

The company currently pays out 60.90% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 65.88%, leading to a dividend yield of 3.42%. Furthermore, EPS should increase to HK$0.43. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Chow Tai Fook Jewellery Group as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Compared to its peers, Chow Tai Fook Jewellery Group has a yield of 5.84%, which is high for Specialty Retail stocks.

Next Steps:

With this in mind, I definitely rank Chow Tai Fook Jewellery Group 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three fundamental factors you should look at:

• 1. Future Outlook: What are well-informed industry analysts predicting for 1929’s future growth? Take a look at our free research report of analyst consensus for 1929’s outlook.

• 2. Valuation: What is 1929 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 1929 is currently mispriced by the market.

• 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.