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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) has been paying a dividend to shareholders. Today it yields 1.6%. Should it have a place in your portfolio? Let’s take a look at Shandong Weigao Group Medical Polymer in more detail.

See our latest analysis for Shandong Weigao Group Medical Polymer

5 checks you should do on a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has dividend per share amount increased over the past?

• Is is able to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

Does Shandong Weigao Group Medical Polymer pass our checks?

Shandong Weigao Group Medical Polymer has a trailing twelve-month payout ratio of 34%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 28%, leading to a dividend yield of around 1.7%. However, EPS should increase to CN¥0.35, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Compared to its peers, Shandong Weigao Group Medical Polymer has a yield of 1.6%, which is high for Medical Equipment stocks but still below the low risk savings rate.

Next Steps:

Whilst there are few things you may like about Shandong Weigao Group Medical Polymer 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, 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 key factors you should further examine: