Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Hang Lung Properties Limited (HKG:101) has paid dividends to shareholders, and these days it yields 4.9%. Should it have a place in your portfolio? Let’s take a look at Hang Lung Properties in more detail.

See our latest analysis for Hang Lung Properties

5 checks you should use to assess a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is it the top 25% annual dividend yield payer?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

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

• Can it afford to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

How well does Hang Lung Properties fit our criteria?

Hang Lung Properties has a trailing twelve-month payout ratio of 38%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 76%, leading to a dividend yield of around 5.0%. However, EPS is forecasted to fall to HK$1.11 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

When assessing the forecast sustainability of a dividend it is also worth considering 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. Although 101’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Hang Lung Properties produces a yield of 4.9%, which is high for Real Estate stocks but still below the market’s top dividend payers.

Next Steps:

Considering the dividend attributes we analyzed above, Hang Lung Properties is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 101’s future growth? Take a look at our free research report of analyst consensus for 101’s outlook.

2. Valuation: What is 101 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 101 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.