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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, Soundwill Holdings Limited (HKG:878) has paid dividends to shareholders, and these days it yields 1.7%. Let’s dig deeper into whether Soundwill Holdings should have a place in your portfolio.

Check out our latest analysis for Soundwill Holdings

5 questions to ask before buying a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?

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

• Has it increased its dividend per share amount 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?

Does Soundwill Holdings pass our checks?

The current trailing twelve-month payout ratio for the stock is 4.1%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. 878 has increased its DPS from HK$0.070 to HK$0.20 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. This is an impressive feat, which makes 878 a true dividend rockstar.

In terms of its peers, Soundwill Holdings generates a yield of 1.7%, which is on the low-side for Real Estate stocks.

Next Steps:

If you are building an income portfolio, then Soundwill Holdings is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. I’ve put together three essential aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for 878’s future growth? Take a look at our free research report of analyst consensus for 878’s outlook.

2. Valuation: What is 878 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 878 is currently mispriced by the market.

3. 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.