Only Two Days Left To Cash In On PAX Global Technology's (HKG:327) Dividend
Readers hoping to buy PAX Global Technology Limited (HKG:327) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase PAX Global Technology's shares before the 4th of September in order to receive the dividend, which the company will pay on the 24th of September.
The company's upcoming dividend is HK$0.08 a share, following on from the last 12 months, when the company distributed a total of HK$0.16 per share to shareholders. Based on the last year's worth of payments, PAX Global Technology stock has a trailing yield of around 4.0% on the current share price of HK$4.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether PAX Global Technology can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. PAX Global Technology has a low and conservative payout ratio of just 9.6% of its income after tax. A useful secondary check can be to evaluate whether PAX Global Technology generated enough free cash flow to afford its dividend. Fortunately, it paid out only 26% of its free cash flow in the past year.
It's positive to see that PAX Global Technology's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for PAX Global Technology
Click here to see how much of its profit PAX Global Technology paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that PAX Global Technology's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, PAX Global Technology has lifted its dividend by approximately 15% a year on average.
Final Takeaway
Has PAX Global Technology got what it takes to maintain its dividend payments? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but PAX Global Technology is halfway there. Overall we think this is an attractive combination and worthy of further research.
So while PAX Global Technology looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that PAX Global Technology is showing 2 warning signs in our investment analysis, and 1 of those shouldn't be ignored...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.