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Is Buying Luk Fook Holdings (International) Limited (HKG:590) For Its Upcoming HK$0.55 Dividend A Good Choice?

Raj Burman

Attention dividend hunters! Luk Fook Holdings (International) Limited (HKG:590) will be distributing its dividend of HK$0.55 per share on the 30 August 2018, and will start trading ex-dividend in 2 days time on the 17 August 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Luk Fook Holdings (International)’s most recent financial data to examine its dividend characteristics in more detail.

Check out our latest analysis for Luk Fook Holdings (International)

5 checks you should do on 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?
  • 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 it be able to continue to payout at the current rate in the future?
SEHK:590 Historical Dividend Yield August 14th 18

Does Luk Fook Holdings (International) pass our checks?

The current trailing twelve-month payout ratio for the stock is 38.59%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 590’s payout to increase to 43.16% of its earnings, which leads to a dividend yield of 4.44%. Moreover, EPS should increase to HK$2.57. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. 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.

In terms of its peers, Luk Fook Holdings (International) has a yield of 4.10%, which is high for Specialty Retail stocks but still below the market’s top dividend payers.

Next Steps:

With this in mind, I definitely rank Luk Fook Holdings (International) as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 important aspects you should further research:

  1. 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.
  2. 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.
  3. 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.