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A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, CSE Global Limited (SGX:544) has returned an average of 5.00% per year to shareholders in terms of dividend yield. Does CSE Global tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for CSE Global
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has it paid dividend every year without dramatically reducing payout in the past?
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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 it have the ability to keep paying its dividends going forward?
Does CSE Global pass our checks?
CSE Global has a negative payout ratio, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings. 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. Not only have dividend payouts from CSE Global fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends. Relative to peers, CSE Global produces a yield of 5.23%, which is high for IT stocks.
Next Steps:
Taking all the above into account, CSE Global is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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. There are three pertinent aspects you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for 544’s future growth? Take a look at our free research report of analyst consensus for 544’s outlook.
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Valuation: What is 544 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 544 is currently mispriced by the market.
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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.