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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Recently, VBG International Holdings Limited (HKG:8365) has started paying dividends to shareholders. Today it yields 4.0%. Should it have a place in your portfolio? Let’s take a look at VBG International Holdings in more detail.
See our latest analysis for VBG International 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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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 dividend per share amount increased 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?
How well does VBG International Holdings fit our criteria?
The company currently pays out 59.6% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently 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.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider VBG International Holdings as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
In terms of its peers, VBG International Holdings generates a yield of 4.0%, which is on the low-side for Capital Markets stocks.
Next Steps:
After digging a little deeper into VBG International Holdings’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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. There are three important factors you should look at: