Sany Heavy Equipment International Holdings Company Limited (HKG:631) stock is about to trade ex-dividend in 3 days time. Ex-dividend means that investors that purchase the stock on or after the 28th of May will not receive this dividend, which will be paid on the 22nd of June.
The upcoming dividend for Sany Heavy Equipment International Holdings will put a total of HK$0.12 per share in shareholders' pockets, up from last year's total dividends of HK$0.11. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Sany Heavy Equipment International Holdings has been able to grow its dividends, or if the dividend might be cut.
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 Sany Heavy Equipment International Holdings's payout ratio is modest, at just 36% of profit. 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. Over the last year it paid out 60% of its free cash flow as dividends, within the usual range for most companies.
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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Sany Heavy Equipment International Holdings's earnings have been skyrocketing, up 40% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sany Heavy Equipment International Holdings has delivered 12% dividend growth per year on average over the past ten years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Sany Heavy Equipment International Holdings an attractive dividend stock, or better left on the shelf? Earnings per share have grown at a nice rate in recent times and over the last year, Sany Heavy Equipment International Holdings paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Sany Heavy Equipment International Holdings, and we would prioritise taking a closer look at it.
While it's tempting to invest in Sany Heavy Equipment International Holdings for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Sany Heavy Equipment International Holdings and you should be aware of them before buying any shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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. Thank you for reading.