Yahoo Finance

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. HRnetGroup Limited (SGX:CHZ) has begun paying dividends recently. It now yields 2.9%. Does HRnetGroup tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

View our latest analysis for HRnetGroup

Want to help shape the future of investing tools? Participate in a short research study and receive a 6-month subscription to the award winning Simply Wall St research tool (valued at $60)!

Here’s how I find good dividend stocks

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

• Is it the top 25% annual dividend yield payer?

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

• Has it increased its dividend per share amount over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

How does HRnetGroup fare?

The current trailing twelve-month payout ratio for the stock is 38%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CHZ’s payout to increase to 52% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.9%. However, EPS is forecasted to fall to SGD0.056 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view HRnetGroup as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether CHZ one as a stable dividend player.

Compared to its peers, HRnetGroup has a yield of 2.9%, which is high for Professional Services stocks but still below the market’s top dividend payers.

Next Steps:

Whilst there are few things you may like about HRnetGroup from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 important factors you should look at: