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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Skyworth Digital Holdings Limited (HKG:751) has paid dividends to shareholders, and these days it yields 3.9%. Let’s dig deeper into whether Skyworth Digital Holdings should have a place in your portfolio.
View our latest analysis for Skyworth Digital 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:
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Is it paying an annual yield above 75% of dividend payers?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has the amount of dividend per share grown over the past?
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Can it afford 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 well does Skyworth Digital Holdings fit our criteria?
Skyworth Digital Holdings has a trailing twelve-month payout ratio of 28%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 751’s payout to increase to 32% of its earnings. Assuming a constant share price, this equates to a dividend yield of 6.5%. Moreover, EPS should increase to HK$0.39. 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. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, Skyworth Digital Holdings generates a yield of 3.9%, which is high for Consumer Durables stocks but still below the market’s top dividend payers.
Next Steps:
With this in mind, I definitely rank Skyworth Digital Holdings as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 examine: