A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Yip’s Chemical Holdings Limited (HKG:408) has returned to shareholders over the past 10 years, an average dividend yield of 4.00% annually. Let’s dig deeper into whether Yip’s Chemical Holdings should have a place in your portfolio.
5 questions to ask before buying 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 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 is able 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 well does Yip’s Chemical Holdings fit our criteria?
Yip’s Chemical Holdings has a trailing twelve-month payout ratio of 49.59%, which means that the dividend is 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.
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. Not only have dividend payouts from Yip’s Chemical Holdings fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, Yip’s Chemical Holdings has a yield of 5.80%, which is on the low-side for Chemicals stocks.
Whilst there are few things you may like about Yip’s Chemical Holdings from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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. I’ve put together three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for 408’s future growth? Take a look at our free research report of analyst consensus for 408’s outlook.
- Historical Performance: What has 408’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 firstname.lastname@example.org.