A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Over the past 3 years, PAX Global Technology Limited (SEHK:327) has returned an average of 1.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at PAX Global Technology in more detail. Check out our latest analysis for PAX Global Technology
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has it increased its dividend per share amount over the past?
- Is it able 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?
How well does PAX Global Technology fit our criteria?
PAX Global Technology has a trailing twelve-month payout ratio of 21.78%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 18.85%, leading to a dividend yield of around 2.34%. However, EPS should increase to HK$0.46, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider PAX Global Technology 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. In terms of its peers, PAX Global Technology produces a yield of 2.00%, which is on the low-side for Electronic stocks.
If you are building an income portfolio, then PAX Global Technology is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 327’s future growth? Take a look at our free research report of analyst consensus for 327’s outlook.
- Valuation: What is 327 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 327 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 pass 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.