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 Golden Wheel Tiandi Holdings Company Limited (HKG:1232) is about to go ex-dividend in just 1 days. You can purchase shares before the 26th of May in order to receive the dividend, which the company will pay on the 9th of June.
Golden Wheel Tiandi Holdings's next dividend payment will be HK$0.016 per share, which looks like a nice increase on last year, when the company distributed a total of HK$0.014 to shareholders. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Golden Wheel Tiandi 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. Golden Wheel Tiandi Holdings is paying out just 10.0% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. The good news is it paid out just 20% of its free cash flow in the 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?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Golden Wheel Tiandi Holdings's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Golden Wheel Tiandi Holdings is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Golden Wheel Tiandi Holdings has seen its dividend decline 18% per annum on average over the past seven years, which is not great to see.
To Sum It Up
Is Golden Wheel Tiandi Holdings an attractive dividend stock, or better left on the shelf? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Golden Wheel Tiandi Holdings is halfway there. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To that end, you should learn about the 4 warning signs we've spotted with Golden Wheel Tiandi Holdings (including 1 which is a bit unpleasant).
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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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.