A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Maanshan Iron & Steel Company Limited (HKG:323) has returned to shareholders over the past 10 years, an average dividend yield of 1.00% annually. Does Maanshan Iron & Steel tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

Check out our latest analysis for Maanshan Iron & Steel

5 checks you should use to assess a dividend stock

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

• Is their annual yield among the top 25% of dividend payers?

• 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?

• 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?

How does Maanshan Iron & Steel fare?

Maanshan Iron & Steel has a trailing twelve-month payout ratio of 27.68%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 33.85%, leading to a dividend yield of around 5.92%. However, EPS is forecasted to fall to CN¥0.59 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

In terms of its peers, Maanshan Iron & Steel generates a yield of 4.77%, which is high for Metals and Mining stocks but still below the market’s top dividend payers.

Next Steps:

With these dividend metrics in mind, I definitely rank Maanshan Iron & Steel as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. Below, I’ve compiled three fundamental factors you should further research: