Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Bank of Chongqing Co Ltd (HKG:1963) has returned to shareholders over the past 5 years, an average dividend yield of 4.00% annually. Does Bank of Chongqing tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Bank of Chongqing

5 checks you should use to assess a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

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

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share amount increased over the past?

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

• Will it have the ability to keep paying its dividends going forward?

How well does Bank of Chongqing fit our criteria?

Bank of Chongqing has a trailing twelve-month payout ratio of 9.83%, which means that the dividend is covered by earnings. Going forward, analysts expect 1963’s payout to increase to 18.52% of its earnings, which leads to a dividend yield of 5.12%. In addition to this, EPS should increase to CN¥1.24. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Bank of Chongqing as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, Bank of Chongqing generates a yield of 2.74%, which is on the low-side for Banks stocks.

Next Steps:

Whilst there are few things you may like about Bank of Chongqing from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key factors you should further research: