Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 10 years, Hiap Hoe Limited (SGX:5JK) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Hiap Hoe in more detail. See our latest analysis for Hiap Hoe

5 questions to ask before buying a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

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

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How does Hiap Hoe fare?

Hiap Hoe has a trailing twelve-month payout ratio of 8.77%, meaning the dividend is sufficiently 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. 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. Shareholders would have seen a few years of reduced payments in this time. In terms of its peers, Hiap Hoe generates a yield of 2.25%, which is on the low-side for Real Estate stocks.

Next Steps:

Whilst there are few things you may like about Hiap Hoe 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three essential aspects you should further examine:

1. Valuation: What is 5JK 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 5JK is currently mispriced by the market.

2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Hiap Hoe’s board and the CEO’s back ground.

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 pass 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.