Read This Before Buying Wuxi Sunlit Science and Technology Company Limited (HKG:1289) For Its Dividend
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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Wuxi Sunlit Science and Technology Company Limited (HKG:1289) has recently paid dividends to shareholders, and currently yields 2.8%. Does Wuxi Sunlit Science and Technology tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
See our latest analysis for Wuxi Sunlit Science and Technology
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has it increased its dividend per share amount over the past?
Is is able to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Wuxi Sunlit Science and Technology pass our checks?
The company currently pays out 13% of its earnings as a dividend, according to its trailing twelve-month data, 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.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Wuxi Sunlit Science and Technology 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, Wuxi Sunlit Science and Technology has a yield of 2.8%, which is on the low-side for Machinery stocks.
Next Steps:
After digging a little deeper into Wuxi Sunlit Science and Technology's yield, it's easy to see why you should be cautious investing in the company just for the dividend. 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 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 pertinent aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for 1289’s future growth? Take a look at our free research report of analyst consensus for 1289’s outlook.
Valuation: What is 1289 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 1289 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
