Readers hoping to buy Galaxy Entertainment Group Limited (HKG:27) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 25th of March will not receive this dividend, which will be paid on the 24th of April.
Galaxy Entertainment Group's upcoming dividend is HK$0.45 a share, following on from the last 12 months, when the company distributed a total of HK$0.91 per share to shareholders. Based on the last year's worth of payments, Galaxy Entertainment Group stock has a trailing yield of around 2.1% on the current share price of HK$43.2. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Galaxy Entertainment Group, with earnings per share up 4.3% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last five years, Galaxy Entertainment Group has lifted its dividend by approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Should investors buy Galaxy Entertainment Group for the upcoming dividend? Galaxy Entertainment Group has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Galaxy Entertainment Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while Galaxy Entertainment Group has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Galaxy Entertainment Group is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...
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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