Yahoo Finance

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. JNBY Design Limited (SEHK:3306) has returned an average dividend yield of 4.00% annually to shareholders. Let’s dig deeper into whether JNBY Design should have a place in your portfolio. View our latest analysis for JNBY Design

5 questions I ask before picking a dividend stock

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

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

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

• Has dividend per share risen in the past couple of years?

• 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 JNBY Design fit our criteria?

The current trailing twelve-month payout ratio for the stock is 83.13%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 72.86%, leading to a dividend yield of 4.63%. However, EPS should increase to CN¥0.88, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. Unfortunately, it is really too early to view JNBY Design 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 3306 one as a stable dividend player. Relative to peers, JNBY Design produces a yield of 2.65%, which is on the low-side for Luxury stocks.

Next Steps:

Taking all the above into account, JNBY Design is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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, 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 important factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 3306’s future growth? Take a look at our free research report of analyst consensus for 3306’s outlook.

2. Valuation: What is 3306 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 3306 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 pass 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.