Should You Buy MTR Corporation Limited (HKG:66) For Its Dividend?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. MTR Corporation Limited (SEHK:66) has returned to shareholders over the past 10 years, an average dividend yield of 3.00% annually. Should it have a place in your portfolio? Let’s take a look at MTR in more detail. See our latest analysis for MTR
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 its annual yield among the top 25% of dividend-paying companies?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has dividend per share risen in the past couple of years?
Is it 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?
How does MTR fare?
MTR has a trailing twelve-month payout ratio of 23.32%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 61.12%, leading to a dividend yield of around 2.76%. However, EPS is forecasted to fall to HK$1.79 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. Compared to its peers, MTR generates a yield of 2.51%, which is on the low-side for Transportation stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank MTR 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three pertinent factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for 66’s future growth? Take a look at our free research report of analyst consensus for 66’s outlook.
Valuation: What is 66 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 66 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 pass 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.
