Dividend investors generally want to invest in stable companies that can sustain dividend payments over long periods. They also aim to acquire these companies at an attractive valuation.
In this article, we will look at two dividend-paying companies that could be good long-term investments.
Company 1
The first company here is Hengan International Group Company Ltd (SEHK: 1044), which is one of the largest hygiene product manufacturers in China. Hengan produces products a range of products, including sanitary napkins, baby and adult diapers, tissue paper, and wet wipes.
There are many good things to like about Hengan as a dividend stock.
To begin, it provides daily necessities that consumers will buy regardless of the external economic environment. This allows the manufacturer to deliver sustainable financial performance over time. For perspective, Hengan grew its net profit from RMB3.1 billion to RMB 3.9 billion over the last five years (up by 26%).
The company has also consistently grown dividends over time. Between 2014 and 2019, dividend per share (DPS) increased from RMB 2.00 to RMB 2.25. That’s a 12.5% jump. It’s also worth mentioning that Hengan’s payout ratio is relatively low at 68%, which provides ample room to maintain its current existing dividend payout.
As HK$ 66.95 (as of writing), it has a dividend yield of 3.8%.
Company 2
The other company that we will look at is Hang Seng Bank (SEHK: 0011).
Hang Seng Bank is one of the leading banks in Hong Kong. It is part of the HSBC Group, which holds a majority equity interest of 62.14% in the bank.
Hang Seng Bank’s share price fell by more than 35% over the last 12 months because of the continuous protests in Hong Kong. The bank was also negatively impacted by the COVID-19 outbreak. The decline makes it one of the highest yielding blue-chip stock in Hong Kong now at 6.2%.
Despite its high dividend yield, there’s a risk that Hang Seng Bank might follow in the footstep of its parent company, which temporarily suspend dividend payments to maintain its financial soundness. For now, this is just speculation. Still, investors who are willing to hold the stock for the longer term – say five years or more – might find the stock to be attractive thanks to its low valuation of about 10 times the price-to-earnings ratio.
Foolish conclusion
The global economy is undergoing a challenging period stemming from the virus outbreak.
Nevertheless, long-term investors should take this opportunity to selectively invest in good dividend stocks. Hengan International and Hang Seng Bank are two examples of such stocks.