It looks like China Weaving Materials Holdings Limited (HKG:3778) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 12th of September will not receive the dividend, which will be paid on the 14th of October.
China Weaving Materials Holdings's next dividend payment will be CN¥0.015 per share, and in the last 12 months, the company paid a total of CN¥0.027 per share. Calculating the last year's worth of payments shows that China Weaving Materials Holdings has a trailing yield of 8.8% on the current share price of HK$0.34. If you buy this business for its dividend, you should have an idea of whether China Weaving Materials Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. China Weaving Materials Holdings is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see China Weaving Materials Holdings has grown its earnings rapidly, up 24% a year for the past five years. China Weaving Materials Holdings earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 7 years ago, China Weaving Materials Holdings has lifted its dividend by approximately 9.3% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
From a dividend perspective, should investors buy or avoid China Weaving Materials Holdings? China Weaving Materials Holdings has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past seven 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.
Want to learn more about China Weaving Materials Holdings's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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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