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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. In the last few years Colour Life Services Group Co Limited (HKG:1778) has paid a dividend to shareholders. Today it yields 2.6%. Should it have a place in your portfolio? Let’s take a look at Colour Life Services Group in more detail.
See our latest analysis for Colour Life Services Group
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has it increased its dividend per share amount 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 Colour Life Services Group fare?
Colour Life Services Group has a trailing twelve-month payout ratio of 34.1%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 41.1%, leading to a dividend yield of 5.2%. In addition to this, EPS should increase to CN¥0.45. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering 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. The reality is that it is too early to consider Colour Life Services Group as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Colour Life Services Group generates a yield of 2.6%, which is on the low-side for Real Estate stocks.
Next Steps:
Taking all the above into account, Colour Life Services Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 key factors you should look at: