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Dividend investors like to invest in companies that are well-positioned to sustain dividend payments over the long term.
Generally, this can be found in blue-chip companies that have established long term track record. Here, we will explore one of the best dividend stock that’s hidden in plain sight – Ping An Insurance Group Co of China Ltd (SEHK: 2318).
For starters, Ping An is an insurance-turned-integrated-financial-services provider in China, providing insurance, banking, asset management, and internet finance products and services to close to 200 million retail customers.
Historically, the company appeared on the radar of growth investors and value investors, mainly due to its strong growth and low valuation. Yet, there are plenty of reasons for investors to look at the company as a dividend stock.
Stable business performance
For a company to qualify as a good dividend stock, it must have a rock-solid business model that allows it to generate sustainable income over the long term. Ping An is one such business. Let’s consider the following.
In the last decade, Ping An has never reported a year with losses. During that period, revenue has grown more than seven times while net profit grew close to eight times.
Such performance was impressive, especially given that it operates in a highly competitive environment (most of its competitors are state-backed insurers and banks).
Going forward, the company is well-positioned to sustain its performance given its leading market share in the insurance industry, as well as through its various investments in the nascent Fintech industry.
Strong dividend growth
One important criterion that any income investor looks for when investing in a company is the track record of its dividend. Similarly, the focus is to look for stable, or even better, increasing dividend payments over the years.
In the case of Ping An, not only has it delivered stable business performance in the last decade, it has paid solid dividends during the period. Here are some numbers: dividend per share (DPS) grew from RMB 0.45 in 2009 to RMB 1.72 in 2018. In other words, DPS was up by 282% during the decade!
Though past performance is no guarantee of the future results, Ping An’s track record of growing its dividend payment gives us some confidence that it will maintain a similar dividend policy in the future.
Thus, as long as it can grow its profitability over time, dividend investors should expect to see higher dividend payments in the future.
In all, dividend investors might want to give Ping An Insurance a closer look given its solid business and dividend track record.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.