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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, China Yongda Automobiles Services Holdings Limited (HKG:3669) has been paying a dividend to shareholders. Today it yields 6.5%. Does China Yongda Automobiles Services Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for China Yongda Automobiles Services Holdings

5 checks you should do on a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is it the top 25% annual dividend yield payer?

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

• Has the amount of dividend per share grown over the past?

• Does earnings amply cover its dividend payments?

• Will it be able to continue to payout at the current rate in the future?

How does China Yongda Automobiles Services Holdings fare?

The current trailing twelve-month payout ratio for the stock is 31%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 29% which, assuming the share price stays the same, leads to a dividend yield of around 6.7%. In addition to this, EPS is forecasted to fall to CN¥0.87 in the upcoming year.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

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. The reality is that it is too early to consider China Yongda Automobiles Services 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.

Compared to its peers, China Yongda Automobiles Services Holdings produces a yield of 6.5%, which is high for Specialty Retail stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank China Yongda Automobiles Services Holdings as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. 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. I’ve put together three pertinent aspects you should further examine: