If you are interested in cashing in on Zhongyuan Bank Co., Ltd.'s (HKG:1216) upcoming dividend of CN¥0.035 per share, you only have 3 days left to buy the shares before its ex-dividend date, 22 May 2019, in time for dividends payable on the 28 June 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Zhongyuan Bank's latest financial data to analyse its dividend attributes.
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Here's how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
- 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 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?
Does Zhongyuan Bank pass our checks?
The current trailing twelve-month payout ratio for the stock is 34%, 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. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliability 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. Unfortunately, it is really too early to view Zhongyuan Bank as a dividend investment. Last year was the company's first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.
In terms of its peers, Zhongyuan Bank produces a yield of 1.8%, which is on the low-side for Banks stocks.
After digging a little deeper into Zhongyuan Bank's yield, it's easy to see why you should be cautious investing in the company just for the dividend. 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, 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 fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for 1216’s future growth? Take a look at our free research report of analyst consensus for 1216’s outlook.
- Valuation: What is 1216 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 1216 is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger 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 email@example.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.