Know This Before Buying Winson Holdings Hong Kong Limited (HKG:8421) For Its Dividend
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Winson Holdings Hong Kong Limited (HKG:8421) has started paying a dividend to shareholders. It currently trades on a yield of 5.0%. Does Winson Holdings Hong Kong tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Winson Holdings Hong Kong
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is their annual yield among the top 25% 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 is able 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?
How does Winson Holdings Hong Kong fare?
The current trailing twelve-month payout ratio for the stock is 51%, 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.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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 Winson Holdings Hong Kong 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 8421 one as a stable dividend player.
Compared to its peers, Winson Holdings Hong Kong has a yield of 5.0%, which is high for Commercial Services stocks but still below the market’s top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Winson Holdings Hong Kong for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. Below, I’ve compiled three key factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for 8421’s future growth? Take a look at our free research report of analyst consensus for 8421’s outlook.
Historical Performance: What has 8421’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 editorial-team@simplywallst.com.
