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Investors who want to cash in on China MeiDong Auto Holdings Limited’s (HKG:1268) upcoming dividend of CN¥0.041 per share have only 4 days left to buy the shares before its ex-dividend date, 11 September 2018, in time for dividends payable on the 28 September 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at China MeiDong Auto Holdings’s most recent financial data to examine its dividend characteristics in more detail.

View our latest analysis for China MeiDong Auto Holdings

5 checks you should use to assess a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

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

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

• Will it be able to continue to payout at the current rate in the future?

How well does China MeiDong Auto Holdings fit our criteria?

The current trailing twelve-month payout ratio for the stock is 44.5%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 44.3%, leading to a dividend yield of 6.0%. Moreover, EPS should increase to CN¥0.35.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider China MeiDong Auto Holdings as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, China MeiDong Auto Holdings produces a yield of 4.3%, which is on the low-side for Specialty Retail stocks.

Next Steps:

If you are building an income portfolio, then China MeiDong Auto Holdings is a complicated choice since it has some positive aspects as well as negative ones. 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 recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 1268’s future growth? Take a look at our free research report of analyst consensus for 1268’s outlook.

2. Valuation: What is 1268 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 1268 is currently mispriced by the market.

3. 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.