PAX Global Technology Limited (HKG:327) stock is about to trade ex-dividend in 2 days time. You will need to purchase shares before the 21st of August to receive the dividend, which will be paid on the 10th of September.
PAX Global Technology's next dividend payment will be HK$0.04 per share, and in the last 12 months, the company paid a total of HK$0.08 per share. Last year's total dividend payments show that PAX Global Technology has a trailing yield of 2.5% on the current share price of HK$3.14. 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! As a result, readers should always check whether PAX Global Technology has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. PAX Global Technology has a low and conservative payout ratio of just 15% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 55% of its free cash flow as dividends, within the usual 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?
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, PAX Global Technology's earnings per share have been growing at 20% a year for the past five years. PAX Global Technology has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. PAX Global Technology has delivered an average of 19% per year annual increase in its dividend, based on the past 4 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid PAX Global Technology? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. PAX Global Technology looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of PAX Global Technology? See what analysts 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.
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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.