It looks like Fujikon Industrial Holdings Limited (HKG:927) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Fujikon Industrial Holdings' shares on or after the 29th of August, you won't be eligible to receive the dividend, when it is paid on the 15th of September.
The company's next dividend payment will be HK$0.06 per share, and in the last 12 months, the company paid a total of HK$0.07 per share. Based on the last year's worth of payments, Fujikon Industrial Holdings has a trailing yield of 8.4% on the current stock price of HK$0.83. If you buy this business for its dividend, you should have an idea of whether Fujikon Industrial Holdings's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Fujikon Industrial Holdings
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fujikon Industrial Holdings distributed an unsustainably high 121% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Fujikon Industrial Holdings generated enough free cash flow to afford its dividend. It paid out more than half (51%) of its free cash flow in the past year, which is within an average range for most companies.
It's good to see that while Fujikon Industrial Holdings's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see how much of its profit Fujikon Industrial Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Fujikon Industrial Holdings's earnings per share have been shrinking at 4.5% 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. Fujikon Industrial Holdings's dividend payments per share have declined at 5.2% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Is Fujikon Industrial Holdings an attractive dividend stock, or better left on the shelf? Earnings per share have been in decline, which is not encouraging. What's more, Fujikon Industrial Holdings is paying out a majority of its earnings and over half its free cash flow. It's hard to say if the business has the financial resources and time to turn things around without cutting the dividend. It's not that we think Fujikon Industrial Holdings is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Fujikon Industrial Holdings. We've identified 3 warning signs with Fujikon Industrial Holdings (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.