There is a lot to be liked about Lonking Holdings Limited (HKG:3339) as an income stock. It has paid dividends over the past 10 years. The company is currently worth HK$8.1b, and now yields roughly 7.2%. Let’s dig deeper into whether Lonking Holdings should have a place in your portfolio.
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5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- 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 dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it be able to continue to payout at the current rate in the future?
How does Lonking Holdings fare?
Lonking Holdings has a trailing twelve-month payout ratio of 46%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 49% which, assuming the share price stays the same, leads to a dividend yield of 9.3%. Furthermore, EPS should increase to CN¥0.31.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Compared to its peers, Lonking Holdings produces a yield of 7.2%, which is high for Machinery stocks.
With this in mind, I definitely rank Lonking Holdings as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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. I’ve put together three relevant aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 3339’s future growth? Take a look at our free research report of analyst consensus for 3339’s outlook.
- Valuation: What is 3339 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 3339 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 email@example.com.