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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Sinopharm Group Co Ltd (HKG:1099) has paid dividends to shareholders, and these days it yields 1.7%. Should it have a place in your portfolio? Let’s take a look at Sinopharm Group in more detail.
View our latest analysis for Sinopharm Group
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is their annual yield among the top 25% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share risen in the past couple of years?
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Is is able to pay the current rate of dividends from its earnings?
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Will it have the ability to keep paying its dividends going forward?
How does Sinopharm Group fare?
The current trailing twelve-month payout ratio for the stock is 30%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 31%, leading to a dividend yield of 2.0%. Moreover, EPS should increase to CN¥2.19.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
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. The reality is that it is too early to consider Sinopharm Group as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Sinopharm Group has a yield of 1.7%, which is on the low-side for Healthcare stocks.
Next Steps:
After digging a little deeper into Sinopharm Group’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. Below, I’ve compiled three fundamental factors you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for 1099’s future growth? Take a look at our free research report of analyst consensus for 1099’s outlook.
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Valuation: What is 1099 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 1099 is currently mispriced by the market.
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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.