Zooming in on NYSE:DL’s 4.6% Dividend Yield
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, China Distance Education Holdings Limited (NYSE:DL) has paid a dividend to shareholders. It currently yields 4.6%. Let’s dig deeper into whether China Distance Education Holdings should have a place in your portfolio.
Check out our latest analysis for China Distance Education Holdings
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is it the top 25% annual dividend yield payer?
Has it paid dividend every year without dramatically reducing payout in the past?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How well does China Distance Education Holdings fit our criteria?
The current payout ratio for DL is negative, which means that it is loss-making, and paying its dividend from its retained earnings.
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.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view China Distance Education Holdings as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, China Distance Education Holdings has a yield of 4.6%, which is high for Consumer Services stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in China Distance Education Holdings 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three important factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for DL’s future growth? Take a look at our free research report of analyst consensus for DL’s outlook.
Valuation: What is DL 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 DL 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.
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.
