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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, Tianneng Power International Limited (HKG:819) has paid a dividend to shareholders. It currently yields 5.3%. Does Tianneng Power International tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Tianneng Power International
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share amount increased over the past?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
Does Tianneng Power International pass our checks?
The company currently pays out 28% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 32% which, assuming the share price stays the same, leads to a dividend yield of around 6.8%. In addition to this, EPS should increase to CN¥1.15. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors 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. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Although 819’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.
In terms of its peers, Tianneng Power International generates a yield of 5.3%, which is high for Auto Components stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank Tianneng Power International as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. Below, I’ve compiled three fundamental aspects you should further examine: