Is China Everbright International Limited (HKG:257) A Smart Choice For Dividend Investors?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, China Everbright International Limited (HKG:257) has been paying a dividend to shareholders. Today it yields 3.5%. Does China Everbright International tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for China Everbright International
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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 dividend per share risen in the past couple of years?
Can it afford to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does China Everbright International pass our checks?
China Everbright International has a trailing twelve-month payout ratio of 27%, which means that the dividend is covered by earnings. Going forward, analysts expect 257’s payout to remain around the same level at 30% of its earnings. Assuming a constant share price, this equates to a dividend yield of 4.0%. In addition to this, EPS should increase to HK$0.88.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. 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. Although 257’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
In terms of its peers, China Everbright International has a yield of 3.5%, which is high for Commercial Services stocks but still below the market’s top dividend payers.
Next Steps:
With this in mind, I definitely rank China Everbright 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, 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 relevant factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for 257’s future growth? Take a look at our free research report of analyst consensus for 257’s outlook.
Historical Performance: What has 257’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
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.
