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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, Uni-President China Holdings Ltd (HKG:220) has been paying a dividend to shareholders. Today it yields 2.4%. Should it have a place in your portfolio? Let’s take a look at Uni-President China Holdings in more detail.
See our latest analysis for Uni-President China Holdings
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is its annual yield among the top 25% of dividend-paying companies?
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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 the amount of dividend per share grown over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
Does Uni-President China Holdings pass our checks?
The current trailing twelve-month payout ratio for the stock is 60%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect 220’s payout to fall to 38% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.1%. However, EPS should increase to CN¥0.27, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Uni-President China Holdings produces a yield of 2.4%, which is on the low-side for Food stocks.
Next Steps:
With this in mind, I definitely rank Uni-President China Holdings as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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. There are three important factors you should further research: