A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Over the past 10 years, Avi-Tech Electronics Limited (SGX:BKY) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let’s take a look at Avi-Tech Electronics in more detail. Check out our latest analysis for Avi-Tech Electronics
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is it the top 25% annual dividend yield payer?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share amount increased over the past?
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Is it able to pay the current rate of dividends from its earnings?
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Will the company be able to keep paying dividend based on the future earnings growth?
Does Avi-Tech Electronics pass our checks?
The company currently pays out 54.97% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 87.58%, leading to a dividend yield of around 6.82%. However, EPS is forecasted to fall to SGD0.04 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Not only have dividend payouts from Avi-Tech Electronics 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, Avi-Tech Electronics produces a yield of 5.91%, which is high for Semiconductor stocks.
Next Steps:
Keeping in mind the dividend characteristics above, Avi-Tech Electronics is definitely worth considering for investors looking to build a dedicated income portfolio. 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 fundamental factors you should further research:
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Future Outlook: What are well-informed industry analysts predicting for BKY’s future growth? Take a look at our free research report of analyst consensus for BKY’s outlook.
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Valuation: What is BKY 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 BKY is currently mispriced by the market.
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Other 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 pass 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.