Come Sure Group (Holdings) Limited (HKG:794) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 25th of September, you won't be eligible to receive this dividend, when it is paid on the 23rd of October.
Come Sure Group (Holdings)'s upcoming dividend is HK$0.04 a share, following on from the last 12 months, when the company distributed a total of HK$0.04 per share to shareholders. Looking at the last 12 months of distributions, Come Sure Group (Holdings) has a trailing yield of approximately 6.9% on its current stock price of HK$0.58. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
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 Come Sure Group (Holdings)'s payout ratio is modest, at just 34% of profit. A useful secondary check can be to evaluate whether Come Sure Group (Holdings) generated enough free cash flow to afford its dividend. Over the past year it paid out 150% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Come Sure Group (Holdings) paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Come Sure Group (Holdings) to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
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. With that in mind, we're encouraged by the steady growth at Come Sure Group (Holdings), with earnings per share up 2.5% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Come Sure Group (Holdings)'s dividend payments per share have declined at 1.4% per year on average over the past ten years, which is uninspiring.
Should investors buy Come Sure Group (Holdings) for the upcoming dividend? Come Sure Group (Holdings) delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 150% of its cash flow over the last year, which is a mediocre outcome. All things considered, we are not particularly enthused about Come Sure Group (Holdings) from a dividend perspective.
Keen to explore more data on Come Sure Group (Holdings)'s financial performance? Check out our visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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