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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. Nameson Holdings Limited (HKG:1982) has recently paid dividends to shareholders, and currently yields 7.0%. Let’s dig deeper into whether Nameson Holdings should have a place in your portfolio.

See our latest analysis for Nameson Holdings

Here’s how I find good dividend stocks

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

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

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

• Is is able to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

How does Nameson Holdings fare?

The current trailing twelve-month payout ratio for the stock is 37%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 34%, leading to a dividend yield of around 9.0%. Moreover, EPS should increase to HK$0.18.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. 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 Nameson Holdings as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Nameson Holdings generates a yield of 7.0%, which is high for Luxury stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Nameson Holdings is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. 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. I’ve put together three pertinent aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for 1982’s future growth? Take a look at our free research report of analyst consensus for 1982’s outlook.

2. Valuation: What is 1982 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 1982 is currently mispriced by the market.

3. 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.