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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Riverstone Holdings Limited (SGX:AP4) has paid a dividend to shareholders. It currently yields 2.1%. Let's dig deeper into whether Riverstone Holdings should have a place in your portfolio.
View our latest analysis for Riverstone Holdings
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has it increased its dividend per share amount over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Will it be able to continue to payout at the current rate in the future?
How does Riverstone Holdings fare?
Riverstone Holdings has a trailing twelve-month payout ratio of 40%, which means that the dividend is covered by earnings. Going forward, analysts expect AP4's payout to remain around the same level at 37% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.4%. Furthermore, EPS should increase to MYR0.20.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. 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, Riverstone Holdings has a yield of 2.1%, which is high for Medical Equipment stocks but still below the low risk savings rate.
Next Steps:
Whilst there are few things you may like about Riverstone Holdings 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 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 relevant factors you should further examine: