Readers hoping to buy Shandong Weigao Group Medical Polymer Company Limited (HKG:1066) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 21st of November in order to be eligible for this dividend, which will be paid on the 23rd of December.
Shandong Weigao Group Medical Polymer's upcoming dividend is HK$0.059 a share, following on from the last 12 months, when the company distributed a total of HK$0.12 per share to shareholders. Based on the last year's worth of payments, Shandong Weigao Group Medical Polymer has a trailing yield of 1.3% on the current stock price of HK$9.99. If you buy this business for its dividend, you should have an idea of whether Shandong Weigao Group Medical Polymer's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shandong Weigao Group Medical Polymer paid out a comfortable 28% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 0.8% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Shandong Weigao Group Medical Polymer'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.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Shandong Weigao Group Medical Polymer has grown its earnings rapidly, up 35% a year for the past five years. Shandong Weigao Group Medical Polymer 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Shandong Weigao Group Medical Polymer has delivered an average of 13% per year annual increase in its dividend, based on the past ten years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Is Shandong Weigao Group Medical Polymer worth buying for its dividend? Shandong Weigao Group Medical Polymer 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. Shandong Weigao Group Medical Polymer looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of Shandong Weigao Group Medical Polymer? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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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