Yahoo Finance Should CITIC Limited (HKG:267) Be Part Of Your Dividend Portfolio?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, CITIC Limited (HKG:267) has been paying a dividend to shareholders. Today it yields 3.1%. Does CITIC tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for CITIC
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is their annual yield among the top 25% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share amount increased 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?
How does CITIC fare?
The company currently pays out 27% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect 267’s payout to remain around the same level at 25% of its earnings. Assuming a constant share price, this equates to a dividend yield of 3.4%. In addition to this, EPS should increase to HK$1.88.
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. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Dividend payments from CITIC have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, CITIC has a yield of 3.1%, which is on the low-side for Industrials stocks.
Next Steps:
Taking all the above into account, CITIC is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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. There are three essential aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for 267’s future growth? Take a look at our free research report of analyst consensus for 267’s outlook.
Historical Performance: What has 267’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.
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.
