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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Yangtzekiang Garment Limited (HKG:294) has been paying a dividend to shareholders. Today it yields 4.0%. Let’s dig deeper into whether Yangtzekiang Garment should have a place in your portfolio.
See our latest analysis for Yangtzekiang Garment
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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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 the amount of dividend per share grown over the past?
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Does earnings amply cover its dividend payments?
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Will it be able to continue to payout at the current rate in the future?
How well does Yangtzekiang Garment fit our criteria?
The current trailing twelve-month payout ratio for the stock is 68%, 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 considering the sustainability of dividends, it is also worth checking the cash flow of a company. 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. Dividend payments from Yangtzekiang Garment have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Compared to its peers, Yangtzekiang Garment generates a yield of 4.0%, which is high for Luxury stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into Yangtzekiang Garment’s yield, it’s easy to see why you should be cautious investing in the company just 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental aspects you should further research: