Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Dali Foods Group Company Limited (HKG:3799) has recently paid dividends to shareholders, and currently yields 3.0%. Let’s dig deeper into whether Dali Foods Group should have a place in your portfolio.
View our latest analysis for Dali Foods Group
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has dividend per share risen in the past couple of years?
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Does earnings amply cover its dividend payments?
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Will it have the ability to keep paying its dividends going forward?
How does Dali Foods Group fare?
The current trailing twelve-month payout ratio for the stock is 58%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 59%, leading to a dividend yield of 3.8%. Furthermore, EPS should increase to CN¥0.30.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. The reality is that it is too early to consider Dali Foods 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.
Compared to its peers, Dali Foods Group produces a yield of 3.0%, which is high for Food stocks but still below the market’s top dividend payers.
Next Steps:
Taking all the above into account, Dali Foods Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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 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 factors you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for 3799’s future growth? Take a look at our free research report of analyst consensus for 3799’s outlook.
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Valuation: What is 3799 worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 3799 is currently mispriced by the market.
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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.