Yahoo Finance What To Know Before Buying China Petroleum & Chemical Corporation (HKG:386) For Its Dividend
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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Historically, China Petroleum & Chemical Corporation (HKG:386) has paid a dividend to shareholders. It currently yields 8.7%. Should it have a place in your portfolio? Let’s take a look at China Petroleum & Chemical in more detail.
View our latest analysis for China Petroleum & Chemical
5 checks you should use to assess a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is its annual yield among the top 25% of dividend-paying companies?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share risen in the past couple of years?
Is is able to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does China Petroleum & Chemical fit our criteria?
China Petroleum & Chemical has a trailing twelve-month payout ratio of 94%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect 386’s payout to fall into a more sustainable range of 83% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 8.3%. EPS is also forecasted to fall to CN¥0.57 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, China Petroleum & Chemical has a yield of 8.7%, which is high for Oil and Gas stocks.
Next Steps:
Keeping in mind the dividend characteristics above, China Petroleum & Chemical is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three fundamental aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for 386’s future growth? Take a look at our free research report of analyst consensus for 386’s outlook.
Valuation: What is 386 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 386 is currently mispriced by the market.
Other 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.
