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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, CHTC Fong’s International Company Limited (HKG:641) has paid dividends to shareholders, and these days it yields 9.6%. Does CHTC Fong’s International tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for CHTC Fong’s International

Here’s how I find good dividend stocks

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

• Is it paying an annual yield above 75% of dividend payers?

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

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

Does CHTC Fong’s International pass our checks?

CHTC Fong’s International has a trailing twelve-month payout ratio of 45%, 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.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. 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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Compared to its peers, CHTC Fong’s International generates a yield of 9.6%, which is high for Machinery stocks.

Next Steps:

Taking into account the dividend metrics, CHTC Fong’s International ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three important aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for 641’s future growth? Take a look at our free research report of analyst consensus for 641’s outlook.

2. Historical Performance: What has 641’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.