Attention dividend hunters! Sinopec Kantons Holdings Limited (HKG:934) will be distributing its dividend of HK$0.05 per share on the 18 October 2018, and will start trading ex-dividend in 4 days time on the 13 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Sinopec Kantons Holdings’s latest financial data to analyse its dividend attributes.

View our latest analysis for Sinopec Kantons Holdings

5 checks you should use to assess a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Does it pay an annual yield higher than 75% 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?

• Does earnings amply cover its dividend payments?

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

How well does Sinopec Kantons Holdings fit our criteria?

The company currently pays out 23.7% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect 934’s payout to increase to 28.3% of its earnings, which leads to a dividend yield of 4.5%. Furthermore, EPS should increase to HK$0.58. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. 934 has increased its DPS from HK$0.035 to HK$0.14 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.

Compared to its peers, Sinopec Kantons Holdings generates a yield of 4.1%, which is on the low-side for Oil and Gas stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Sinopec Kantons Holdings 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, 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 relevant aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for 934’s future growth? Take a look at our free research report of analyst consensus for 934’s outlook.

2. Valuation: What is 934 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 934 is currently mispriced by the market.

3. Other 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.