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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, COSCO SHIPPING Ports Limited (HKG:1199) has been paying a dividend to shareholders. Today it yields 4.1%. Let’s dig deeper into whether COSCO SHIPPING Ports should have a place in your portfolio.
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is their annual yield among the top 25% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- 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 COSCO SHIPPING Ports pass our checks?
COSCO SHIPPING Ports has a trailing twelve-month payout ratio of 39%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 38% which, assuming the share price stays the same, leads to a dividend yield of around 4.0%. In addition to this, EPS should increase to $0.10.
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.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from COSCO SHIPPING Ports have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, COSCO SHIPPING Ports has a yield of 4.1%, which is on the low-side for Infrastructure stocks.
Whilst there are few things you may like about COSCO SHIPPING Ports from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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 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 factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 1199’s future growth? Take a look at our free research report of analyst consensus for 1199’s outlook.
- Valuation: What is 1199 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 1199 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. On rare occasion, data errors may occur. Thank you for reading.