Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the past 10 years Metro Holdings Limited (SGX:M01) has returned an average of 4.00% per year to investors in the form of dividend payouts. Does Metro Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Metro Holdings

Here’s how I find good dividend stocks

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

• Is its annual yield among the top 25% of dividend-paying companies?

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

• Has dividend per share risen in the past couple of years?

• Is its earnings sufficient to payout dividend at the current rate?

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

Does Metro Holdings pass our checks?

Metro Holdings has a trailing twelve-month payout ratio of 8.60%, 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 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. 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. In terms of its peers, Metro Holdings has a yield of 4.35%, which is high for Multiline Retail stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then Metro Holdings is a complicated choice since it has some positive aspects as well as negative ones. 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 important factors you should look at:

• Historical Performance: What has M01’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.

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

• 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.