Emperor Watch & Jewellery Limited (HKG:887) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Emperor Watch & Jewellery's shares before the 7th of September in order to receive the dividend, which the company will pay on the 22nd of September.
The company's next dividend payment will be HK$0.0076 per share, on the back of last year when the company paid a total of HK$0.015 to shareholders. Based on the last year's worth of payments, Emperor Watch & Jewellery stock has a trailing yield of around 8.2% on the current share price of HK$0.185. If you buy this business for its dividend, you should have an idea of whether Emperor Watch & Jewellery's dividend is reliable and sustainable. As a result, readers should always check whether Emperor Watch & Jewellery has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Emperor Watch & Jewellery
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Emperor Watch & Jewellery's payout ratio is modest, at just 29% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 8.7% of its cash flow last year.
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 Emperor Watch & Jewellery paid out over the last 12 months.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Emperor Watch & Jewellery's earnings per share have been growing at 15% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Emperor Watch & Jewellery has seen its dividend decline 1.6% per annum on average over the past 10 years, which is not great to see.
To Sum It Up
Is Emperor Watch & Jewellery an attractive dividend stock, or better left on the shelf? Emperor Watch & Jewellery has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in Emperor Watch & Jewellery for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Emperor Watch & Jewellery 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.