Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Hang Lung Group Limited (HKG:10) has been paying a dividend to shareholders. Today it yields 3.2%. Should it have a place in your portfolio? Let's take a look at Hang Lung Group in more detail.
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it paying an annual yield above 75% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Hang Lung Group pass our checks?
The company currently pays out 21% 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.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. Although 10'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.
In terms of its peers, Hang Lung Group produces a yield of 3.2%, which is on the low-side for Real Estate stocks.
Whilst there are few things you may like about Hang Lung Group from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. 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. There are three pertinent factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for 10’s future growth? Take a look at our free research report of analyst consensus for 10’s outlook.
Valuation: What is 10 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 10 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 firstname.lastname@example.org. 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.