Anhui Conch Cement Company Limited (HKG:914) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 2nd of June in order to receive the dividend, which the company will pay on the 24th of June.
Anhui Conch Cement's next dividend payment will be HK$2.00 per share, on the back of last year when the company paid a total of HK$2.00 to shareholders. Calculating the last year's worth of payments shows that Anhui Conch Cement has a trailing yield of 3.8% on the current share price of HK$56.6. If you buy this business for its dividend, you should have an idea of whether Anhui Conch Cement's dividend is reliable and sustainable. As a result, readers should always check whether Anhui Conch Cement 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. That's why it's good to see Anhui Conch Cement paying out a modest 33% of its earnings. 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. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.
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. That's why it's comforting to see Anhui Conch Cement's earnings have been skyrocketing, up 24% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Anhui Conch Cement has delivered 33% dividend growth per year on average over the past ten years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Should investors buy Anhui Conch Cement for the upcoming dividend? Anhui Conch Cement has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past ten years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Anhui Conch Cement, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Anhui Conch Cement is facing. For example, Anhui Conch Cement has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.
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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.