Income Investors Should Know That Shenguan Holdings (Group) Limited (HKG:829) Goes Ex-Dividend Soon
Readers hoping to buy Shenguan Holdings (Group) Limited (HKG:829) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 29th of June.
The upcoming dividend for Shenguan Holdings (Group) is HK$0.06 per share, increased from last year's total dividends per share of HK$0.018. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Shenguan Holdings (Group)
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 77% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. A useful secondary check can be to evaluate whether Shenguan Holdings (Group) generated enough free cash flow to afford its dividend. The good news is it paid out just 12% of its free cash flow in the last year.
It's positive to see that Shenguan Holdings (Group)'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.
Click here to see how much of its profit Shenguan Holdings (Group) paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Shenguan Holdings (Group)'s earnings per share have plummeted approximately 32% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Shenguan Holdings (Group)'s dividend payments per share have declined at 0.9% per year on average over the past ten years, which is uninspiring.
The Bottom Line
Is Shenguan Holdings (Group) an attractive dividend stock, or better left on the shelf? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. To summarise, Shenguan Holdings (Group) looks okay on this analysis, although it doesn't appear a stand-out opportunity.
However if you're still interested in Shenguan Holdings (Group) as a potential investment, you should definitely consider some of the risks involved with Shenguan Holdings (Group). We've identified 3 warning signs with Shenguan Holdings (Group) (at least 1 which can't be ignored), and understanding them should be part of your investment process.
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.
