On the 10 October 2018, KPa-BM Holdings Limited (HKG:2663) will be paying shareholders an upcoming dividend amount of HK$0.016 per share. However, investors must have bought the company’s stock before 13 September 2018 in order to qualify for the payment. That means you have only 4 days left! Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at KPa-BM Holdings’s most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for KPa-BM Holdings

Here’s how I find good dividend stocks

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

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

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

• Has it increased its dividend per share amount 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?

Does KPa-BM Holdings pass our checks?

KPa-BM Holdings has a trailing twelve-month payout ratio of 36.6%, 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.

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.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider KPa-BM Holdings as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, KPa-BM Holdings generates a yield of 4.0%, which is high for Construction stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into KPa-BM Holdings’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 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 aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 2663’s future growth? Take a look at our free research report of analyst consensus for 2663’s outlook.

2. Valuation: What is 2663 worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 2663 is currently mispriced by the market.

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.