Why Guoco Group Limited (HKG:53)’s 3.43% Dividend Is Not A Good Reason To Buy

Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Guoco Group Limited (HKG:53) has returned to shareholders over the past 10 years, an average dividend yield of 4.00% annually. Does Guoco Group tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View out our latest analysis for Guoco Group

5 checks you should do on a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Is it the top 25% annual dividend yield payer?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

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

• Can it afford to pay the current rate of dividends from its earnings?

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

SEHK:53 Historical Dividend Yield June 25th 18

How well does Guoco Group fit our criteria?

Guoco Group has a trailing twelve-month payout ratio of 19.23%, 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 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. Not only have dividend payouts from Guoco Group fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.

In terms of its peers, Guoco Group generates a yield of 3.43%, which is high for Industrials stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Guoco Group’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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 pertinent aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for 53’s future growth? Take a look at our free research report of analyst consensus for 53’s outlook.

2. Valuation: What is 53 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 53 is currently mispriced by the market.

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 pass 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.