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I’m always on a lookout for stocks to include in my watchlist. To qualify, companies must have characteristics like a quality business, good management, strong balance sheet, stable dividend, and others.
Given the strict criteria, 90% of the companies I encounter fail to make into my watchlist. However, lately, one company has managed to make it in. The company I’m talking about is Vinda International Holdings Limited (SEHK: 3331).
Founded in 1985, Vinda operates in four core segments, namely tissues, incontinence care, feminine care, and baby care.
Its products are sold under key brands including Vinda, Tempo, Tork, TENA, Dr. P, Libresse, VIA, Libero and Drypers.
The company has 14 production bases across China, Malaysia, Taiwan, and Australia, which support its aspiration of becoming a leading hygiene company in Asia.
One of the first reasons why I like the company is its ability to grow its business over a long period of time. In the last five years alone, revenue has grown from HK$9.7 billion (US$1.25 billion) to HK$16.1 billion. Similarly, net profit almost tripled from HK$300 million to HK$1.1 billion during the same period.
The track record above demonstrates that Vinda can execute its strategy well over time. Though we cannot be certain that the company can sustain such performance in the future, we need to have some assurance of its ability to execute. This is clearly evident in its historical performance.
A growing company is good for investors only if the company shares the fruits of its success with shareholders. One important way to do this is by paying stable and growing dividends.
For Vinda, we know that it has grown its business nicely in the last five years. What’s more important to note here, though, is that it has also rewarded shareholders generously with ever-growing dividends.
Here are the numbers. Its dividend per share (DPS) grew from HK$0.10 to HK$0.28 in the last five years. Personally, it’s exciting to find a company that’s able to simultaneously grow its net profit, as well as dividends. Vinda has done just that.
Last but not least, Vinda is operating its business with a low gearing structure. As of 31 December 2019, it has a net gearing ratio of 39% (net gearing is the total borrowings less cash and cash equivalents and restricted bank deposits as a percentage of the total shareholders’ equity).
This is low since it’s a fair distance away from 100%, a percentage I would consider as high. Having a low gearing structure is important for several reasons.
Firstly, the company would be able to withstand any short-term challenges without the risk of bankruptcy. Secondly, it can further leverage its balance sheet to capture good opportunities that will enhance shareholder value.
Key Foolish takeaway
Vinda made it to my watchlist thanks to its solid growth track record, growing dividends, and low gearing. Hopefully, it will make it’ll make it on to yours too.
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.