Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, The Cross-Harbour (Holdings) Limited (HKG:32) has paid dividends to shareholders, and these days it yields 3.1%. Does Cross-Harbour (Holdings) tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

View our latest analysis for Cross-Harbour (Holdings)

5 checks you should do on a dividend stock

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

• Is it the top 25% annual dividend yield payer?

• 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?

• Can it afford to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

Does Cross-Harbour (Holdings) pass our checks?

Cross-Harbour (Holdings) has a trailing twelve-month payout ratio of 29%, 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. 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. 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.

Relative to peers, Cross-Harbour (Holdings) generates a yield of 3.1%, which is high for Consumer Services stocks but still below the market’s top dividend payers.

Next Steps:

Taking all the above into account, Cross-Harbour (Holdings) 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. Below, I’ve compiled three essential factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for 32’s future growth? Take a look at our free research report of analyst consensus for 32’s outlook.

2. Historical Performance: What has 32’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. 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.