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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. China Leon Inspection Holding Limited (HKG:1586) has recently paid dividends to shareholders, and currently yields 2.1%. Does China Leon Inspection Holding tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for China Leon Inspection Holding
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
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Is it paying an annual yield above 75% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share risen in the past couple of years?
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Is its earnings sufficient to payout dividend at the current rate?
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Will the company be able to keep paying dividend based on the future earnings growth?
Does China Leon Inspection Holding pass our checks?
The current trailing twelve-month payout ratio for the stock is 42%, 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 assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider China Leon Inspection Holding 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, China Leon Inspection Holding generates a yield of 2.1%, which is high for Energy Services stocks but still below the market’s top dividend payers.
Next Steps:
After digging a little deeper into China Leon Inspection Holding’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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 fundamental factors you should look at: