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What Makes China Yuchai International Limited (NYSE:CYD) A Great Dividend Stock?

Simply Wall St

If you are an income investor, then China Yuchai International Limited (NYSE:CYD) should be on your radar. China Yuchai International Limited, through its subsidiaries, manufactures and sells diesel and natural gas engines in the People’s Republic of China and internationally. Over the past 10 years, the US$573m market cap company has been growing its dividend payments, from CN¥0.68 to CN¥5.82. Currently yielding 5.9%, let's take a closer look at China Yuchai International's dividend profile.

See our latest analysis for China Yuchai International

What Is A Dividend Rock Star?

It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:

  • It is paying an annual yield above 75% of dividend payers
  • It has paid dividend every year without dramatically reducing payout in the past
  • Its dividend per share amount has increased over the past
  • It can afford to pay the current rate of dividends from its earnings
  • It has the ability to keep paying its dividends going forward

High Yield And Dependable

The company's dividend yield stands at 5.9%, which is high for Machinery stocks. But the real reason China Yuchai International stands out is because it has a high chance of being able to continue to pay dividend at this level for years to come, something that is quite desirable if you are looking to create a portfolio that generates a steady stream of income.

NYSE:CYD Historical Dividend Yield, August 15th 2019

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. CYD has increased its DPS from CN¥0.68 to CN¥5.82 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes CYD a true dividend rockstar.

The company currently pays out 36% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 45% which, assuming the share price stays the same, leads to a dividend yield of around 9.6%. Moreover, EPS should increase to CN¥19.52. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

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.

Next Steps:

Investors of China Yuchai International can continue to expect strong dividends from the stock. With its favorable dividend characteristics, if high income generation is still the goal for your portfolio, then China Yuchai International is one worth keeping around. However, given 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 fundamental aspects you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for CYD’s future growth? Take a look at our free research report of analyst consensus for CYD’s outlook.
  2. Valuation: What is CYD 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 CYD is currently mispriced by the market.
  3. Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.