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Is It Smart To Buy Logan Property Holdings Company Limited (HKG:3380) Before It Goes Ex-Dividend?

Simply Wall St

It looks like Logan Property Holdings Company Limited (HKG:3380) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 14th of November will not receive this dividend, which will be paid on the 29th of November.

Logan Property Holdings's next dividend payment will be HK$0.4 per share. Last year, in total, the company distributed HK$0.8 to shareholders. Calculating the last year's worth of payments shows that Logan Property Holdings has a trailing yield of 6.9% on the current share price of HK$12.34. 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 Logan Property Holdings has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Logan Property Holdings

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. That's why it's good to see Logan Property Holdings paying out a modest 39% of its earnings. 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. The good news is it paid out just 15% of its free cash flow in the last year.

It's positive to see that Logan Property 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.

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

SEHK:3380 Historical Dividend Yield, November 10th 2019

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Logan Property Holdings's earnings have been skyrocketing, up 30% per annum for the past five years. Logan Property Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, Logan Property Holdings has lifted its dividend by approximately 43% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Logan Property Holdings worth buying for its dividend? Logan Property Holdings has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past six years, but the conservative payout ratio makes the current dividend look sustainable. Logan Property Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious what other investors think of Logan Property Holdings? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.