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Shares of Swire Properties Limited (HKG:1972) will begin trading ex-dividend in 4 days. To qualify for the dividend check of HK$0.57 per share, investors must have owned the shares prior to 02 April 2019, which is the last day the company's management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Swire Properties's latest financial data to analyse its dividend attributes.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- 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?
- Is is able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
Does Swire Properties pass our checks?
The current trailing twelve-month payout ratio for the stock is 17%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 1972's payout to increase to 61% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.8%. However, EPS is forecasted to fall to HK$1.45 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Swire Properties as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Swire Properties has a yield of 2.5%, which is on the low-side for Real Estate stocks.
Taking all the above into account, Swire Properties is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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. Below, I've compiled three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 1972’s future growth? Take a look at our free research report of analyst consensus for 1972’s outlook.
- Valuation: What is 1972 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 1972 is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.