Yahoo Finance

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, China Sunshine Paper Holdings Company Limited (HKG:2002) has paid dividends to shareholders, and these days it yields 4.9%. Does China Sunshine Paper Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

View our latest analysis for China Sunshine Paper Holdings

5 questions I ask before picking a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

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

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

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

• Does earnings amply cover its dividend payments?

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

Does China Sunshine Paper Holdings pass our checks?

China Sunshine Paper Holdings has a trailing twelve-month payout ratio of 12%, 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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

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 China Sunshine Paper Holdings as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, China Sunshine Paper Holdings produces a yield of 4.9%, which is on the low-side for Packaging stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in China Sunshine Paper Holdings for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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 pertinent aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for 2002’s future growth? Take a look at our free research report of analyst consensus for 2002’s outlook.

2. Historical Performance: What has 2002’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

3. 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.