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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. Historically, ENN Energy Holdings Limited (HKG:2688) has been paying a dividend to shareholders. Today it yields 1.5%. Let’s dig deeper into whether ENN Energy Holdings should have a place in your portfolio.
View our latest analysis for ENN Energy Holdings
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Here’s how I find good dividend stocks
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Does it pay an annual yield higher than 75% of dividend payers?
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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 be able to continue to payout at the current rate in the future?
How well does ENN Energy Holdings fit our criteria?
The current trailing twelve-month payout ratio for the stock is 35%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 2688’s payout to increase to 42% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.0%. In addition to this, EPS should increase to CN¥4.38. 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. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of 2688 it has increased its DPS from CN¥0.13 to CN¥1.02 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes 2688 a true dividend rockstar.
Relative to peers, ENN Energy Holdings generates a yield of 1.5%, which is on the low-side for Gas Utilities stocks.
Next Steps:
Considering the dividend attributes we analyzed above, ENN Energy 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 look at: