Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Anxian Yuan China Holdings Limited (HKG: 922) is set to be ex-dividend in just four days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. It is important to know the ex-dividend date because any transaction in the share must have been settled by the registration date at the latest. As a result, investors of Anxian Yuan China Holdings who purchase the shares on or after September 28 will not receive the dividend, which will be paid on October 12.
The company’s next dividend is HK $ 0.01 per share, following the last 12 months when the company distributed a total of HK $ 0.02 per share to shareholders. Last year’s total dividend payments show that Anxian Yuan China Holdings is yielding 9.1% on the current share price of HK $ 0.219. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs is not going to kill our goose that lays the golden eggs! That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
Check out our latest analysis for Anxian Yuan China Holdings
Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, then the dividend could be unsustainable. This is why it is good to see Anxian Yuan China Holdings paying a modest 41% of its profits. A useful secondary check may be to assess whether Anxian Yuan China Holdings has generated enough free cash flow to pay its dividend. It paid out 17% of its free cash flow as dividends last year, which is cautiously low.
It is positive to see that Anxian Yuan China Holdings’ dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests. a greater margin of safety before the dividend is cut.
Click here to see how much of its profit Anxian Yuan China Holdings has paid in the past 12 months.
Have profits and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. It is encouraging to see that Anxian Yuan China Holdings has grown its profits rapidly, rising 26% annually over the past five years. Anxian Yuan China Holdings is paying less than half of its earnings and cash flow, while simultaneously increasing earnings per share at a rapid pace. This is a very favorable combination which can often lead to a multiplication of the dividend in the long run, if profits increase and the company pays a higher percentage of its profits.
We also draw your attention to the fact that Anxian Yuan China Holdings issued a significant number of new shares during the past year. Trying to raise the dividend while issuing large amounts of new stock reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a rock upward.
Considering that Anxian Yuan China Holdings has only been paying a dividend for a year, there isn’t much history to glimpse into.
The bottom line
Does Anxian Yuan China Holdings have what it takes to maintain its dividend payments? We like the fact that Anxian Yuan China Holdings is increasing its earnings per share while simultaneously paying a small percentage of its earnings and cash flow. These characteristics suggest that the company is reinvesting in growing its business, while the prudent payout ratio also implies a reduced risk of dividend reduction in the future. There is a lot to like about Anxian Yuan China Holdings, and we would prioritize taking a closer look.
Although it is tempting to invest in Anxian Yuan China Holdings for dividends only, you should always be aware of the risks involved. Concrete example: we have spotted 2 warning signs for Anxian Yuan China Holdings you must be aware.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.
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