Is China MeiDong Auto Holdings Limited (HKG:1268) A Smart Pick For Income Investors?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, China MeiDong Auto Holdings Limited (HKG:1268) has paid a dividend to shareholders. It currently yields 5.5%. Should it have a place in your portfolio? Let’s take a look at China MeiDong Auto Holdings in more detail.
See our latest analysis for China MeiDong Auto 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:
Is it the top 25% annual dividend yield payer?
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?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
Does China MeiDong Auto Holdings pass our checks?
The current trailing twelve-month payout ratio for the stock is 45%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 1268’s payout to remain around the same level at 46% of its earnings. Assuming a constant share price, this equates to a dividend yield of 8.7%. Moreover, EPS should increase to CN¥0.35.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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 China MeiDong Auto Holdings as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, China MeiDong Auto Holdings has a yield of 5.5%, which is on the low-side for Specialty Retail stocks.
Next Steps:
If you are building an income portfolio, then China MeiDong Auto Holdings is a complicated choice since it has some positive aspects as well as negative ones. 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for 1268’s future growth? Take a look at our free research report of analyst consensus for 1268’s outlook.
Valuation: What is 1268 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 1268 is currently mispriced by the market.
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.
