If you are interested in cashing in on Bank of China Limited's (HKG:3988) upcoming dividend of CN¥0.18 per share, you only have 3 days left to buy the shares before its ex-dividend date, 23 May 2019, in time for dividends payable on the 18 June 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Bank of China can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.
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5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Bank of China fare?
The current trailing twelve-month payout ratio for the stock is 31%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 3988's payout to remain around the same level at 31% of its earnings. Assuming a constant share price, this equates to a dividend yield of 6.6%. In addition to this, EPS should increase to CN¥0.63.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. The reality is that it is too early to consider Bank of China as a dividend investment. It has only been consistently paying dividends for 9 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Bank of China has a yield of 6.0%, which is high for Banks stocks.
With these dividend metrics in mind, I definitely rank Bank of China as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. Below, I've compiled three essential factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 3988’s future growth? Take a look at our free research report of analyst consensus for 3988’s outlook.
- Valuation: What is 3988 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 3988 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.
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.