Sun Hing Vision Group Holdings Limited (HKG:125) stock is about to trade ex-dividend in 4 days time. This means that investors who purchase shares on or after the 21st of August will not receive the dividend, which will be paid on the 10th of September.
Sun Hing Vision Group Holdings's next dividend payment will be HK$0.10 per share. Last year, in total, the company distributed HK$0.16 to shareholders. Looking at the last 12 months of distributions, Sun Hing Vision Group Holdings has a trailing yield of approximately 6.5% on its current stock price of HK$2.46. 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 investigate whether Sun Hing Vision Group Holdings can afford its dividend, and if the dividend could grow.
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. Sun Hing Vision Group Holdings paid out 53% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Sun Hing Vision Group Holdings generated enough free cash flow to afford its dividend. It paid out more than half (50%) of its free cash flow in the past year, which is within an average range for most companies.
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 with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Sun Hing Vision Group Holdings's earnings per share have been growing at 10% a year for the past five years. Sun Hing Vision Group Holdings is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sun Hing Vision Group Holdings's dividend payments per share have declined at 0.9% per year on average over the past 10 years, which is uninspiring.
To Sum It Up
Is Sun Hing Vision Group Holdings an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Sun Hing Vision Group Holdings is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it's hard to get excited about Sun Hing Vision Group Holdings from a dividend perspective.
Curious about whether Sun Hing Vision Group Holdings has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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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