If you are an income investor, then China Yuchai International Limited (NYSE:CYD) should be on your radar. China Yuchai International Limited, through its subsidiaries, manufactures and sells diesel and natural gas engines in the People’s Republic of China and internationally. Over the past 10 years, the US$587m market cap company has been growing its dividend payments, from CN¥0.68 to CN¥4.72. Currently yielding 4.7%, let’s take a closer look at China Yuchai International’s dividend profile.
What Is A Dividend Rock Star?
It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its dividend per share amount has increased over the past
- It is able to pay the current rate of dividends from its earnings
- It has the ability to keep paying its dividends going forward
High Yield And Dependable
China Yuchai International currently yields 4.7%, which is high for Machinery stocks. But the real reason China Yuchai International stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you’re investor who wants a robust cash inflow from your portfolio over a long period of time.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of CYD it has increased its DPS from CN¥0.68 to CN¥4.72 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
The company currently pays out 20% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect CYD’s payout to increase to 53% of its earnings, which leads to a dividend yield of 9.8%. However, EPS is forecasted to fall to CN¥19.23 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
China Yuchai International ticks all the boxes for what I look for in a dividend stock. If you are looking to build an income focused portfolio, this could be one to include. However, given 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 essential aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for CYD’s future growth? Take a look at our free research report of analyst consensus for CYD’s outlook.
- Valuation: What is CYD 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 CYD is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better 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 firstname.lastname@example.org.