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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, Tenfu (Cayman) Holdings Company Limited (HKG:6868) has paid dividends to shareholders, and these days it yields 3.0%. Let’s dig deeper into whether Tenfu (Cayman) Holdings should have a place in your portfolio.
Check out our latest analysis for Tenfu (Cayman) 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:
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Is their annual yield among the top 25% of dividend payers?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has the amount of dividend per share grown over the past?
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Can it afford to pay the current rate of dividends from its earnings?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Tenfu (Cayman) Holdings pass our checks?
Tenfu (Cayman) Holdings has a trailing twelve-month payout ratio of 77%, 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 assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity 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. The reality is that it is too early to consider Tenfu (Cayman) Holdings as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Tenfu (Cayman) Holdings generates a yield of 3.0%, which is high for Food stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into Tenfu (Cayman) Holdings’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, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three essential aspects you should further examine: