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, Luk Fook Holdings (International) Limited (HKG:590) has paid a dividend to shareholders. It currently yields 4.9%. Should it have a place in your portfolio? Let’s take a look at Luk Fook Holdings (International) in more detail.
Want to help shape the future of investing tools? Participate in a short research study and receive a subscription valued at $60.
How I analyze 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 it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown 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?
How does Luk Fook Holdings (International) fare?
The current trailing twelve-month payout ratio for the stock is 43%, which means that the dividend is covered by earnings. However, going forward, analysts expect 590’s payout to fall to 22% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 4.7%. However, EPS should increase to HK$2.6, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
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 is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Luk Fook Holdings (International) has a yield of 4.9%, which is on the low-side for Specialty Retail stocks.
Taking into account the dividend metrics, Luk Fook Holdings (International) ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 590’s future growth? Take a look at our free research report of analyst consensus for 590’s outlook.
- Valuation: What is 590 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 590 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 email@example.com.