4 Days To Buy Dawnrays Pharmaceutical (Holdings) Limited (HKG:2348) Before The Ex-Dividend Date

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 Dawnrays Pharmaceutical (Holdings) Limited (HKG:2348) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 2nd of June will not receive the dividend, which will be paid on the 17th of June.

Dawnrays Pharmaceutical (Holdings)'s next dividend payment will be HK$0.043 per share. Last year, in total, the company distributed HK$0.053 to shareholders. Last year's total dividend payments show that Dawnrays Pharmaceutical (Holdings) has a trailing yield of 5.7% on the current share price of HK$1.01. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Dawnrays Pharmaceutical (Holdings)

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Dawnrays Pharmaceutical (Holdings) paying out a modest 32% of its earnings. A useful secondary check can be to evaluate whether Dawnrays Pharmaceutical (Holdings) generated enough free cash flow to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.

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.

Click here to see how much of its profit Dawnrays Pharmaceutical (Holdings) paid out over the last 12 months.

SEHK:2348 Historical Dividend Yield May 28th 2020
SEHK:2348 Historical Dividend Yield May 28th 2020

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Dawnrays Pharmaceutical (Holdings) earnings per share are up 4.9% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past ten years, Dawnrays Pharmaceutical (Holdings) has increased its dividend at approximately 7.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Dawnrays Pharmaceutical (Holdings) worth buying for its dividend? Earnings per share have been growing at a steady rate, and Dawnrays Pharmaceutical (Holdings) paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall, it's hard to get excited about Dawnrays Pharmaceutical (Holdings) from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 2 warning signs for Dawnrays Pharmaceutical (Holdings) that you should be aware of before investing in their shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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. Thank you for reading.