A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Over the past 10 years, Sinopec Kantons Holdings Limited (SEHK:934) has returned an average of 1.00% per year to shareholders in terms of dividend yield. Does Sinopec Kantons Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Sinopec Kantons Holdings

5 questions I ask before picking a dividend stock

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

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

• Is it able to pay the current rate of dividends from its earnings?

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

How does Sinopec Kantons Holdings fare?

The current trailing twelve-month payout ratio for the stock is 17.66%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 934’s payout to increase to 23.92% of its earnings, which leads to a dividend yield of around 2.97%. Furthermore, EPS should increase to HK$0.57. 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. In the case of 934 it has increased its DPS from HK$0.04 to HK$0.1 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes 934 a true dividend rockstar. Compared to its peers, Sinopec Kantons Holdings produces a yield of 2.05%, which is on the low-side for Oil and Gas stocks.

Next Steps:

Taking into account the dividend metrics, Sinopec Kantons Holdings ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 fundamental aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for 934’s future growth? Take a look at our free research report of analyst consensus for 934’s outlook.

2. Valuation: What is 934 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 934 is currently mispriced by the market.

3. Other 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.