Is Air China Limited (HKG:753) A Great Dividend Stock?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Air China Limited (HKG:753) has been paying a dividend to shareholders. Today it yields 2.2%. Should it have a place in your portfolio? Let’s take a look at Air China in more detail.
See our latest analysis for Air China
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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?
Can it afford 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 Air China pass our checks?
The current trailing twelve-month payout ratio for the stock is 21%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect 753’s payout to fall to 19% of its earnings, which leads to a dividend yield of around 2.5%. However, EPS should increase to CN¥0.55, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Although 753’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Air China produces a yield of 2.2%, which is on the low-side for Airlines stocks.
Next Steps:
Considering the dividend attributes we analyzed above, Air China is definitely worth keeping an eye on for someone looking to build a dedicated income 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 key aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for 753’s future growth? Take a look at our free research report of analyst consensus for 753’s outlook.
Valuation: What is 753 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 753 is currently mispriced by the market.
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.
