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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, China High Speed Transmission Equipment Group Co., Ltd. (HKG:658) has paid a dividend to shareholders. It currently yields 1.3%. Let's dig deeper into whether China High Speed Transmission Equipment Group should have a place in your portfolio.
See our latest analysis for China High Speed Transmission Equipment Group
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is it the top 25% annual dividend yield payer?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has it increased its dividend per share amount over the past?
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Does earnings amply cover its dividend payments?
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Will it have the ability to keep paying its dividends going forward?
Does China High Speed Transmission Equipment Group pass our checks?
The current trailing twelve-month payout ratio for the stock is 42%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 658's payout to increase to 72% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 1.9%. Furthermore, EPS should increase to CN¥0.20. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. Not only have dividend payouts from China High Speed Transmission Equipment Group fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, China High Speed Transmission Equipment Group generates a yield of 1.3%, which is on the low-side for Electrical stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in China High Speed Transmission Equipment Group 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. Below, I've compiled three important aspects you should look at: