Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, High Ground Enterprise Ltd (NSE:HIGHGROUND) has been paying a dividend to shareholders. Today it yields 1.1%. Should it have a place in your portfolio? Let’s take a look at High Ground Enterprise in more detail.
View our latest analysis for High Ground Enterprise
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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Is it paying an annual yield above 75% of dividend payers?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has dividend per share amount increased over the past?
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Is is 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?
How well does High Ground Enterprise fit our criteria?
High Ground Enterprise has a trailing twelve-month payout ratio of 7.1%, which means that the dividend is 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 thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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 High Ground Enterprise as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, High Ground Enterprise generates a yield of 1.1%, which is on the low-side for Construction stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in High Ground Enterprise 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, 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. There are three fundamental aspects you should further examine: