Public Financial Holdings Limited (HKG:626) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 22nd of January in order to be eligible for this dividend, which will be paid on the 21st of February.
Public Financial Holdings's next dividend payment will be HK$0.15 per share, on the back of last year when the company paid a total of HK$0.22 to shareholders. Based on the last year's worth of payments, Public Financial Holdings stock has a trailing yield of around 6.8% on the current share price of HK$3.23. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Public Financial Holdings paid out a comfortable 32% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Public Financial Holdings, with earnings per share up 4.0% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Public Financial Holdings's dividend payments are broadly unchanged compared to where they were ten years ago.
The Bottom Line
Should investors buy Public Financial Holdings for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Public Financial Holdings ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Curious about whether Public Financial Holdings has been able to consistently generate growth? Here's a chart 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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