Is Convenience Retail Asia Limited (HKG:831) A Smart Pick For Income Investors?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Convenience Retail Asia Limited (HKG:831) has paid dividends to shareholders, and these days it yields 5.9%. Should it have a place in your portfolio? Let’s take a look at Convenience Retail Asia in more detail.
See our latest analysis for Convenience Retail Asia
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is it the top 25% annual dividend yield payer?
Has it consistently paid a stable dividend without missing a payment or drastically 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 it be able to continue to payout at the current rate in the future?
Does Convenience Retail Asia pass our checks?
Convenience Retail Asia has a trailing twelve-month payout ratio of 90%, meaning the dividend is not sufficiently covered by its earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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, Convenience Retail Asia has a yield of 5.9%, which is high for Consumer Retailing stocks.
Next Steps:
Taking all the above into account, Convenience Retail Asia is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. There are three key aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for 831’s future growth? Take a look at our free research report of analyst consensus for 831’s outlook.
Valuation: What is 831 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 831 is currently mispriced by the market.
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.
