Readers hoping to buy Sun Hing Printing Holdings Limited (HKG:1975) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Sun Hing Printing Holdings' shares on or after the 23rd of November will not receive the dividend, which will be paid on the 20th of December.
The company's next dividend payment will be HK$0.043 per share, and in the last 12 months, the company paid a total of HK$0.065 per share. Based on the last year's worth of payments, Sun Hing Printing Holdings has a trailing yield of 8.9% on the current stock price of HK$0.73. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Sun Hing Printing Holdings can afford its dividend, and if the dividend could grow.
View our latest analysis for Sun Hing Printing 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. Sun Hing Printing Holdings paid out a comfortable 40% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.
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 Sun Hing Printing Holdings 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. It's encouraging to see Sun Hing Printing Holdings has grown its earnings rapidly, up 51% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sun Hing Printing Holdings has delivered an average of 17% per year annual increase in its dividend, based on the past five years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
Is Sun Hing Printing Holdings worth buying for its dividend? It's great that Sun Hing Printing Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Sun Hing Printing Holdings, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 2 warning signs with Sun Hing Printing Holdings 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.