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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Tai Sin Electric Limited (SGX:500) has been paying a dividend to shareholders. Today it yields 6.9%. Should it have a place in your portfolio? Let’s take a look at Tai Sin Electric in more detail.

View our latest analysis for Tai Sin Electric

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Does it pay an annual yield higher than 75% of dividend payers?

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

• Has the amount of dividend per share grown 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?

Does Tai Sin Electric pass our checks?

The company currently pays out 72% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is 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 you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although 500’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Compared to its peers, Tai Sin Electric produces a yield of 6.9%, which is high for Electrical stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Tai Sin Electric is definitely worth considering for investors looking to build a dedicated income portfolio. 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. I’ve put together three fundamental factors you should further examine: