Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Get Nice Financial Group Limited (HKG:1469) is about to go ex-dividend in just 3 days. If you purchase the stock on or after the 29th of August, you won't be eligible to receive this dividend, when it is paid on the 10th of September.
Get Nice Financial Group's next dividend payment will be HK$0.04 per share, and in the last 12 months, the company paid a total of HK$0.08 per share. Looking at the last 12 months of distributions, Get Nice Financial Group has a trailing yield of approximately 9.1% on its current stock price of HK$0.88. 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 investigate whether Get Nice Financial Group can afford its dividend, and if the dividend could grow.
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. Get Nice Financial Group paid out 132% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Get Nice Financial Group's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 88% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Get Nice Financial Group has delivered 26% dividend growth per year on average over the past 3 years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Get Nice Financial Group is already paying out 132% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.
The Bottom Line
Has Get Nice Financial Group got what it takes to maintain its dividend payments? Earnings per share are in decline and Get Nice Financial Group is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Curious about whether Get Nice Financial Group has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.