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Income Investors Should Know That Crystal International Group Limited (HKG:2232) Goes Ex-Dividend Soon

Simply Wall St

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 Crystal International Group Limited (HKG:2232) is about to go ex-dividend in just 4 days. You can purchase shares before the 3rd of September in order to receive the dividend, which the company will pay on the 19th of September.

The upcoming dividend for Crystal International Group is US$0.04 per share, increased from last year's total dividends per share of US$0.021. 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! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Crystal International Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Crystal International Group paid out a comfortable 32% of its profit last year. 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. It paid out 100% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want look more closely here.

Crystal International Group paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Crystal International Group's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

SEHK:2232 Historical Dividend Yield, August 29th 2019

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. This is why it's a relief to see Crystal International Group earnings per share are up 6.6% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

We'd also point out that Crystal International Group issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Unfortunately Crystal International Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

From a dividend perspective, should investors buy or avoid Crystal International Group? Crystal International Group delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 100% of its cash flow over the last year, which is a mediocre outcome. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Crystal International Group's dividend merits.

Wondering what the future holds for Crystal International Group? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.