A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, SITC International Holdings Company Limited (HKG:1308) has paid a dividend to shareholders. It currently yields 6.9%. Let’s dig deeper into whether SITC International Holdings should have a place in your portfolio.

Check out our latest analysis for SITC International Holdings

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 their annual yield among the top 25% of dividend payers?

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

• Has the amount of dividend per share grown over the past?

• Does earnings amply cover its dividend payments?

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

How does SITC International Holdings fare?

The company currently pays out 61% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 72%, leading to a dividend yield of 6.9%. Furthermore, EPS should increase to $0.079. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

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. The reality is that it is too early to consider SITC International Holdings as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, SITC International Holdings produces a yield of 6.9%, which is high for Shipping stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank SITC International 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, 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. Below, I’ve compiled three fundamental factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for 1308’s future growth? Take a look at our free research report of analyst consensus for 1308’s outlook.

2. Valuation: What is 1308 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 1308 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.