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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 10 years Shenzhen Investment Limited (SEHK:604) has returned an average of 7.00% per year to investors in the form of dividend payouts. Does Shenzhen Investment tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Shenzhen Investment
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:
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Is their annual yield among the top 25% of dividend payers?
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Has it paid dividend every year without dramatically reducing payout in the past?
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Has dividend per share risen in the past couple of years?
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Does earnings amply cover its dividend payments?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Shenzhen Investment pass our checks?
The current trailing twelve-month payout ratio for the stock is 28.28%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 45.07%, leading to a dividend yield of around 5.95%. However, EPS is forecasted to fall to HK$0.48 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Dividend payments from Shenzhen Investment have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves. In terms of its peers, Shenzhen Investment has a yield of 5.52%, which is high for Real Estate stocks.
Next Steps:
With this in mind, I definitely rank Shenzhen Investment as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. 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 research:
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Future Outlook: What are well-informed industry analysts predicting for 604’s future growth? Take a look at our free research report of analyst consensus for 604’s outlook.
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Valuation: What is 604 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 604 is currently mispriced by the market.
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Other 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.