Be Sure To Check Out Hong Kong Shanghai Alliance Holdings Limited (HKG:1001) Before It Goes Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hong Kong Shanghai Alliance Holdings Limited (HKG:1001) is about to go ex-dividend in just four days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Hong Kong Shanghai Alliance Holdings' shares before the 15th of December in order to be eligible for the dividend, which will be paid on the 8th of January.
The company's next dividend payment will be HK$0.02 per share, and in the last 12 months, the company paid a total of HK$0.033 per share. Based on the last year's worth of payments, Hong Kong Shanghai Alliance Holdings has a trailing yield of 8.0% on the current stock price of HK$0.415. If you buy this business for its dividend, you should have an idea of whether Hong Kong Shanghai Alliance Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hong Kong Shanghai Alliance Holdings paid out a comfortable 25% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 7.9% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
See our latest analysis for Hong Kong Shanghai Alliance Holdings
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Hong Kong Shanghai Alliance Holdings has grown its earnings rapidly, up 34% a year for the past five years. Hong Kong Shanghai Alliance Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hong Kong Shanghai Alliance Holdings's dividend payments per share have declined at 9.0% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
To Sum It Up
From a dividend perspective, should investors buy or avoid Hong Kong Shanghai Alliance Holdings? It's great that Hong Kong Shanghai Alliance Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.
On that note, you'll want to research what risks Hong Kong Shanghai Alliance Holdings is facing. In terms of investment risks, we've identified 3 warning signs with Hong Kong Shanghai Alliance Holdings and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.