A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Recently, Yintech Investment Holdings Limited (NASDAQ:YIN) has returned an average of 7.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Yintech Investment Holdings in more detail. See our latest analysis for Yintech Investment Holdings
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is their annual yield among the top 25% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does Yintech Investment Holdings fit our criteria?
The current trailing twelve-month payout ratio for the stock is 45.03%, meaning the dividend is sufficiently 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. 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. Unfortunately, it is really too early to view Yintech Investment Holdings as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether YIN one as a stable dividend player. Relative to peers, Yintech Investment Holdings produces a yield of 8.33%, which is high for Capital Markets stocks.
Taking all the above into account, Yintech Investment Holdings is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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. There are three pertinent factors you should further examine:
- 1. Valuation: What is YIN 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 YIN is currently mispriced by the market.
- 2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Yintech Investment Holdings’s board and the CEO’s back ground.
- 3. 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.