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Over the past 10 years Guangzhou R&F Properties Co., Ltd. (HKG:2777) has been paying dividends to shareholders. The company currently pays out a dividend yield of 8.3% to shareholders, making it a relatively attractive dividend stock. Let's dig deeper into whether Guangzhou R&F Properties should have a place in your portfolio.
Check out our latest analysis for Guangzhou R&F Properties
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is it paying an annual yield above 75% of dividend payers?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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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 have the ability to keep paying its dividends going forward?
Does Guangzhou R&F Properties pass our checks?
The company currently pays out 47% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect 2777's payout to fall to 41% of its earnings. Assuming a constant share price, this equates to a dividend yield of 13%. However, EPS should increase to CN¥3.93, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 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 2777'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.
Compared to its peers, Guangzhou R&F Properties produces a yield of 8.3%, which is high for Real Estate stocks.
Next Steps:
With this in mind, I definitely rank Guangzhou R&F Properties 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, 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. There are three essential aspects you should look at: