Readers hoping to buy Winox Holdings Limited (HKG:6838) 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 10th of September in order to be eligible for this dividend, which will be paid on the 27th of September.
Winox Holdings's next dividend payment will be HK$0.05 per share. Last year, in total, the company distributed HK$0.14 to shareholders. Calculating the last year's worth of payments shows that Winox Holdings has a trailing yield of 5.9% on the current share price of HK$2.45. 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! We need to see whether the dividend is covered by earnings and if it's growing.
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. Winox Holdings paid out a comfortable 47% 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 distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Winox Holdings'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?
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. It's encouraging to see Winox Holdings has grown its earnings rapidly, up 26% a year for the past five years. Winox Holdings is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Winox Holdings has delivered 17% dividend growth per year on average over the past 8 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Has Winox Holdings got what it takes to maintain its dividend payments? It's great that Winox Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Winox Holdings, and we would prioritise taking a closer look at it.
Curious about whether Winox Holdings has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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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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.