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Have you been keeping an eye on Precision Tsugami (China) Corporation Limited’s (HKG:1651) upcoming dividend of CN¥0.20 per share payable on the 21 December 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 07 December 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Precision Tsugami (China)’s latest financial data to analyse its dividend attributes.

Check out our latest analysis for Precision Tsugami (China)

5 questions I ask before picking a dividend stock

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

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

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

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

• Is is able to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

Does Precision Tsugami (China) pass our checks?

Precision Tsugami (China) has a trailing twelve-month payout ratio of 15%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 29%, leading to a dividend yield of around 3.9%. In addition to this, EPS should increase to CN¥0.92. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

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. Unfortunately, it is really too early to view Precision Tsugami (China) 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.

Compared to its peers, Precision Tsugami (China) produces a yield of 1.9%, which is on the low-side for Machinery stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Precision Tsugami (China) 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 pertinent factors you should further research: