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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Lanzhou Zhuangyuan Pasture Co., Ltd. (HKG:1533) has recently paid dividends to shareholders, and currently yields 1.2%. Does Lanzhou Zhuangyuan Pasture tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Can it afford 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 Lanzhou Zhuangyuan Pasture pass our checks?
Lanzhou Zhuangyuan Pasture has a trailing twelve-month payout ratio of 20%, which means that the dividend is covered by 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 considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. The reality is that it is too early to consider Lanzhou Zhuangyuan Pasture as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Lanzhou Zhuangyuan Pasture produces a yield of 1.2%, which is on the low-side for Food stocks.
After digging a little deeper into Lanzhou Zhuangyuan Pasture’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. 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. Below, I’ve compiled three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 1533’s future growth? Take a look at our free research report of analyst consensus for 1533’s outlook.
- Historical Performance: What has 1533’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.