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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 last few years Telecom Digital Holdings Limited (HKG:6033) has paid a dividend to shareholders. Today it yields 9.3%. Let’s dig deeper into whether Telecom Digital Holdings should have a place in your portfolio.

See our latest analysis for Telecom Digital Holdings

5 questions I ask before picking a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• 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?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

Does Telecom Digital Holdings pass our checks?

The current trailing twelve-month payout ratio for the stock is 66%, 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. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Telecom Digital 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.

Compared to its peers, Telecom Digital Holdings produces a yield of 9.3%, which is high for Electronic stocks.

Next Steps:

If you are building an income portfolio, then Telecom Digital 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 essential factors you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for 6033’s future growth? Take a look at our free research report of analyst consensus for 6033’s outlook.

2. Valuation: What is 6033 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 6033 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.