Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see China Resources Land Limited (HKG:1109) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 25th of September in order to be eligible for this dividend, which will be paid on the 15th of October.
China Resources Land's upcoming dividend is HK$0.1 a share, following on from the last 12 months, when the company distributed a total of HK$1.1 per share to shareholders. Calculating the last year's worth of payments shows that China Resources Land has a trailing yield of 3.6% on the current share price of HK$33.3. If you buy this business for its dividend, you should have an idea of whether China Resources Land's dividend is reliable and sustainable. As a result, readers should always check whether China Resources Land has been able to grow its dividends, or if the dividend might be cut.
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. China Resources Land paid out a comfortable 27% of its profit last year. A useful secondary check can be to evaluate whether China Resources Land generated enough free cash flow to afford its dividend. Luckily it paid out just 23% of its free 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.
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. For this reason, we're glad to see China Resources Land's earnings per share have risen 16% per annum over the last 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.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past ten years, China Resources Land has increased its dividend at approximately 27% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Should investors buy China Resources Land for the upcoming dividend? China Resources Land has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past ten years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
Ever wonder what the future holds for China Resources Land? See what the 23 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.