Is It Smart To Buy Golden Eagle Retail Group Limited (HKG:3308) Before It Goes Ex-Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Golden Eagle Retail Group Limited (HKG:3308) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 2nd of June, you won't be eligible to receive this dividend, when it is paid on the 15th of June.
Golden Eagle Retail Group's next dividend payment will be HK$0.23 per share, and in the last 12 months, the company paid a total of HK$0.35 per share. Calculating the last year's worth of payments shows that Golden Eagle Retail Group has a trailing yield of 5.0% on the current share price of HK$7.48. 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 Golden Eagle Retail Group can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Golden Eagle Retail Group
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. Fortunately Golden Eagle Retail Group's payout ratio is modest, at just 49% of profit. A useful secondary check can be to evaluate whether Golden Eagle Retail Group generated enough free cash flow to afford its dividend. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Golden Eagle Retail 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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Golden Eagle Retail Group, with earnings per share up 3.2% on average over the last five years. 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. Golden Eagle Retail Group has delivered an average of 12% per year annual increase in its dividend, based on the past ten years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Should investors buy Golden Eagle Retail Group for the upcoming dividend? Earnings per share growth has been growing somewhat, and Golden Eagle Retail Group is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Golden Eagle Retail Group is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Golden Eagle Retail Group, and we would prioritise taking a closer look at it.
While it's tempting to invest in Golden Eagle Retail Group for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Golden Eagle Retail Group you should be aware of.
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.
