Over the past 10 years Sinopec Shanghai Petrochemical Company Limited (HKG:338) has returned an average of 2.0% per year from dividend payouts. The company is currently worth HK$62.43b, and now yields roughly 7.4%. Let’s dig deeper into whether Sinopec Shanghai Petrochemical should have a place in your portfolio.
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it the top 25% annual dividend yield payer?
- 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?
- Can it afford 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 does Sinopec Shanghai Petrochemical fare?
The company currently pays out 45.8% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 48.8%, leading to a dividend yield of 6.8%. Moreover, EPS is forecasted to fall to CN¥0.56 in the upcoming year.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
Relative to peers, Sinopec Shanghai Petrochemical generates a yield of 7.4%, which is high for Chemicals stocks.
Keeping in mind the dividend characteristics above, Sinopec Shanghai Petrochemical is definitely worth considering for investors looking to build a dedicated income portfolio. 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 aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 338’s future growth? Take a look at our free research report of analyst consensus for 338’s outlook.
- Valuation: What is 338 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 338 is currently mispriced by the market.
- Other 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 firstname.lastname@example.org.