Does China SCE Group Holdings Limited (HKG:1966) Have A Place In Your Portfolio?
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, China SCE Group Holdings Limited (HKG:1966) has paid dividends to shareholders, and these days it yields 5.9%. Let’s dig deeper into whether China SCE Group Holdings should have a place in your portfolio.
See our latest analysis for China SCE Group Holdings
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Does it pay an annual yield higher than 75% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Will it have the ability to keep paying its dividends going forward?
How does China SCE Group Holdings fare?
The company currently pays out 16% 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 1966’s payout to increase to 32% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 11%. However, EPS is forecasted to fall to CN¥0.82 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.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider China SCE Group Holdings as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, China SCE Group Holdings has a yield of 5.9%, which is high for Real Estate stocks.
Next Steps:
Taking into account the dividend metrics, China SCE Group Holdings ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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. I’ve put together three pertinent factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for 1966’s future growth? Take a look at our free research report of analyst consensus for 1966’s outlook.
Valuation: What is 1966 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 1966 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 editorial-team@simplywallst.com.
