China Oriental Group Company Limited (HKG:581) has pleased shareholders over the past 10 years, by paying out dividends. The stock currently pays out a dividend yield of 8.5%, and has a market cap of HK$22.3b. Let’s dig deeper into whether China Oriental Group should have a place in your portfolio.
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- 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 the amount of dividend per share grown over the past?
- Is is 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 well does China Oriental Group fit our criteria?
The company currently pays out 21% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 581’s payout to increase to 29% of its earnings, which leads to a dividend yield of 6.8%. However, EPS is forecasted to fall to CN¥1.25 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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.
Relative to peers, China Oriental Group generates a yield of 8.5%, which is high for Metals and Mining stocks.
With this in mind, I definitely rank China Oriental Group 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 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 relevant aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 581’s future growth? Take a look at our free research report of analyst consensus for 581’s outlook.
- Valuation: What is 581 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 581 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.