Yahoo Finance

A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Manfield Chemical Holdings Limited (HKG:1561) has recently paid dividends to shareholders, and currently yields 1.8%. Should it have a place in your portfolio? Let’s take a look at Manfield Chemical Holdings in more detail.

Check out our latest analysis for Manfield Chemical Holdings

5 checks you should use to assess a dividend stock

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 the amount of dividend per share grown over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

Does Manfield Chemical Holdings pass our checks?

1561 currently pays out twice what it is earning, according to its trailing twelve-month data, meaning that the dividend is predominantly funded by retained 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. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Manfield Chemical 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, Manfield Chemical Holdings has a yield of 1.8%, which is on the low-side for Chemicals stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Manfield Chemical 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. I’ve put together three fundamental aspects you should further examine: