Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Speed Apparel Holding Limited (HKG:8183) has started paying a dividend to shareholders. It currently trades on a yield of 3.2%. Let’s dig deeper into whether Speed Apparel Holding should have a place in your portfolio.
See our latest analysis for Speed Apparel Holding
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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:
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Is their annual yield among the top 25% of dividend payers?
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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 it increased its dividend per share amount over the past?
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Is its earnings sufficient to payout dividend at the current rate?
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Will it have the ability to keep paying its dividends going forward?
How does Speed Apparel Holding fare?
Speed Apparel Holding has a trailing twelve-month payout ratio of 31%, which means that the dividend is 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.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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 Speed Apparel Holding 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, Speed Apparel Holding has a yield of 3.2%, which is on the low-side for Luxury stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Speed Apparel Holding 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. I’ve put together three relevant aspects you should look at: