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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, COSCO SHIPPING Ports Limited (HKG:1199) has been paying a dividend to shareholders. Today it yields 4.1%. Let’s dig deeper into whether COSCO SHIPPING Ports should have a place in your portfolio.
Check out our latest analysis for COSCO SHIPPING Ports
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share amount increased over the past?
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Can it afford to pay the current rate of dividends from its earnings?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does COSCO SHIPPING Ports pass our checks?
COSCO SHIPPING Ports has a trailing twelve-month payout ratio of 39%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 38% which, assuming the share price stays the same, leads to a dividend yield of around 4.0%. In addition to this, EPS should increase to $0.10.
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’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from COSCO SHIPPING Ports have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, COSCO SHIPPING Ports has a yield of 4.1%, which is on the low-side for Infrastructure stocks.
Next Steps:
Whilst there are few things you may like about COSCO SHIPPING Ports from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three relevant factors you should further examine: