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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, Winfair Investment Company Limited (HKG:287) has paid a dividend to shareholders. It currently yields 1.1%. Does Winfair Investment tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for Winfair Investment

Here’s how I find good dividend stocks

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• 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 dividend per share amount increased over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

Does Winfair Investment pass our checks?

The current trailing twelve-month payout ratio for the stock is 1.6%, which means that the dividend is 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 you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

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. Dividend payments from Winfair Investment have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.

Relative to peers, Winfair Investment has a yield of 1.1%, which is on the low-side for Real Estate stocks.

Next Steps:

After digging a little deeper into Winfair Investment’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three essential aspects you should look at: