Have you been keeping an eye on China YuHua Education Corporation Limited’s (SEHK:6169) upcoming dividend of CN¥0.05 per share payable on the 15 June 2018? Then you only have 2 days left before the stock starts trading ex-dividend on the 14 May 2018. Should you diversify into China YuHua Education and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail. View our latest analysis for China YuHua Education

5 questions to ask before buying a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has dividend per share risen in the past couple of years?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

Does China YuHua Education pass our checks?

The company currently pays out 56.94% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect 6169’s payout to fall to 47.08% of its earnings, which leads to a dividend yield of 2.32%. However, EPS should increase to CN¥0.17, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. Unfortunately, it is really too early to view China YuHua Education 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. Relative to peers, China YuHua Education produces a yield of 1.87%, which is high for Consumer Services stocks but still below the market’s top dividend payers.

Next Steps:

Taking all the above into account, China YuHua Education is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. There are three fundamental aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for 6169’s future growth? Take a look at our free research report of analyst consensus for 6169’s outlook.

2. Valuation: What is 6169 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 6169 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 pass 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.