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Important news for shareholders and potential investors in TK Group (Holdings) Limited (HKG:2283): The dividend payment of HK$0.06 per share will be distributed into shareholder on 13 September 2018, and the stock will begin trading ex-dividend at an earlier date, 29 August 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 TK Group (Holdings)’s most recent financial data to examine its dividend characteristics in more detail.

See our latest analysis for TK Group (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:

• Does it pay an annual yield higher than 75% of dividend payers?

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

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

• Is is able to pay the current rate of dividends from its earnings?

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

How does TK Group (Holdings) fare?

The company currently pays out 45.2% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 47.2%, leading to a dividend yield of around 4.6%. Moreover, EPS should increase to HK$0.52.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. The reality is that it is too early to consider TK Group (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.

Relative to peers, TK Group (Holdings) has a yield of 3.0%, which is high for Machinery stocks but still below the market’s top dividend payers.

Next Steps:

If TK Group (Holdings) is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 pertinent factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 2283’s future growth? Take a look at our free research report of analyst consensus for 2283’s outlook.

2. Valuation: What is 2283 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 2283 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.