Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. HRnetGroup Limited (SGX:CHZ) has returned an average dividend yield of 3.00% annually to shareholders. Let’s dig deeper into whether HRnetGroup should have a place in your portfolio. View out our latest analysis for HRnetGroup

5 questions to ask before buying a dividend stock

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

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

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

• Has the amount of dividend per share grown over the past?

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

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

How does HRnetGroup fare?

The current trailing twelve-month payout ratio for the stock is 44.54%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CHZ’s payout to increase to 52.03% of its earnings, which leads to a dividend yield of around 3.30%. However, EPS is forecasted to fall to SGD0.050 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view HRnetGroup as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether CHZ one as a stable dividend player.

Compared to its peers, HRnetGroup has a yield of 2.67%, which is high for Professional Services stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then HRnetGroup is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer 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 further examine: