Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Perfect Group International Holdings Limited (HKG:3326) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 2nd of September to receive the dividend, which will be paid on the 17th of September.
Perfect Group International Holdings's next dividend payment will be HK$0.01 per share, on the back of last year when the company paid a total of HK$0.02 to shareholders. Based on the last year's worth of payments, Perfect Group International Holdings has a trailing yield of 3.1% on the current stock price of HK$0.64. If you buy this business for its dividend, you should have an idea of whether Perfect Group International Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Perfect Group International 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. Perfect Group International Holdings 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. Fortunately, it paid out only 45% of its free cash flow in the past year.
It's positive to see that Perfect Group International Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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. With that in mind, we're encouraged by the steady growth at Perfect Group International Holdings, with earnings per share up 3.9% on average over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Perfect Group International Holdings's dividend payments are broadly unchanged compared to where they were three years ago.
From a dividend perspective, should investors buy or avoid Perfect Group International Holdings? Earnings per share have been growing moderately, and Perfect Group International Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Perfect Group International Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. Perfect Group International Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Keen to explore more data on Perfect Group International Holdings's financial performance? Check out our visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top 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.