CHL has a streak of 7 consecutive years of dividend increases. It pays dividends semi-annually in the months of May and September. CHL's annual dividend is listed at $2.18, which represents a dividend yield of 4.25% with CHL priced at $51.28 per share.
Over the past 10 years, CHL has outperformed the S&P 500 handily, returning about 469% compared to about 63% for the S&P 500 and 65% for the Dow Jones. Performance for the past 5 years is not so impressive. CHL actually lost about 17% over this period, though EPS growth topped 8% and dividend growth topped 14%.
Analysis
CHL passes the following of my selection criteria:
- Sum of dividend yield (4.25%) and 5-yr dividend CAGR (14.16%) is 18.41% (Chowder Dividend Rule)
- EPS% Payout ratio is 42.04% (below 65%)
- Debt to Equity ratio is 0% (below 50%)
- 7-year weighted average dividend growth rate is 13.35% (at least 7%)
- Forward P/E ratio is 10.34 and the trailing twelve month (TTM) P/E ratio is 9.90 (below 16%)
- 5-yr total payback percentage is 22.22% (at least 16%)
My confidence in CHL's ability to continue with dividend increases is moderate. Except for this point, CHL passes all my selection criteria and earns 7 stars: (*******)
Other ratings for CHL
| S&P Capital IQ's Stock Report | (*****)Hold |
| MorningStar Rating | (*****) |
| The Motley Fool's CAPS Rating | (*****) |
Final Remarks
CHL pays a generous dividend. If I were to purchase 48 shares at the current price of $51.28, those shares would provide annual dividend income of $104.53 to DivGro. After my recent purchase, I'm down to less that $1000 in cash, so I'll have to wait for further cash inflows into DivGro before buying more shares.
CHL is as a high-profile monopoly in China with a 70% government stake. With such a large stake, the company's dominance will be protected by the government. Additionally, evidence suggests that CHL is laying the groundwork to become a major iPhone carrier.
A risk factor for CHL is that questions are being asked about the growth prospects in China. Growth seems to be slowing down, albeit from very high levels of about 8% per year.
Analysts point out that the majority of Chinese may be skipping the personal computing revolution in favor of smartphones. This would make CHL a major growth prospect and a good long-term investment. For this reason, I may revisit CHL in future when I have enough cash to buy more shares.
Full Disclosure: I don't own any CHL shares and I'm not planning on buying any soon.
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