A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the past 10 years Highway Holdings Limited (NASDAQ:HIHO) has returned an average of 7.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at Highway Holdings in more detail. View our latest analysis for Highway Holdings
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Highway Holdings fare?
The current trailing twelve-month payout ratio for HIHO is 95.46%, meaning the dividend is not sufficiently covered by its 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. Although HIHO’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. In terms of its peers, Highway Holdings generates a yield of 8.94%, which is high for Machinery stocks.
If you are building an income portfolio, then Highway Holdings is a complicated choice since it has some positive aspects as well as negative ones. 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 relevant factors you should further examine:
- 1. Valuation: What is HIHO 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 HIHO 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 Highway 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.