Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Paliburg Holdings Limited (HKG:617) has paid a dividend to shareholders. It currently yields 3.4%. Should it have a place in your portfolio? Let’s take a look at Paliburg Holdings in more detail.

View our latest analysis for Paliburg Holdings

5 checks you should use to assess 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 consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has the amount of dividend per share grown over the past?

• Does earnings amply cover its dividend payments?

• Will it have the ability to keep paying its dividends going forward?

How well does Paliburg Holdings fit our criteria?

The current trailing twelve-month payout ratio for the stock is 24%, meaning the dividend is sufficiently 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. 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. Although 617’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Paliburg Holdings produces a yield of 3.4%, which is on the low-side for Hospitality stocks.

Next Steps:

Taking all the above into account, Paliburg Holdings 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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three key factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 617’s future growth? Take a look at our free research report of analyst consensus for 617’s outlook.

2. Historical Performance: What has 617’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

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.