U.S. Markets open in 4 hrs 15 mins

Is It Worth Considering Grand Ming Group Holdings Limited (HKG:1271) For Its Upcoming Dividend?

Simply Wall St

Grand Ming Group Holdings Limited (HKG:1271) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 30th of July, you won't be eligible to receive this dividend, when it is paid on the 15th of August.

Grand Ming Group Holdings's upcoming dividend is HK$0.058 a share, following on from the last 12 months, when the company distributed a total of HK$0.098 per share to shareholders. Last year's total dividend payments show that Grand Ming Group Holdings has a trailing yield of 2.0% on the current share price of HK$5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Grand Ming Group Holdings has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Grand Ming Group Holdings

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. Grand Ming Group Holdings paid out a comfortable 47% of its profit last year. 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. It paid out 87% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Grand Ming Group 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.

Click here to see how much of its profit Grand Ming Group Holdings paid out over the last 12 months.

SEHK:1271 Historical Dividend Yield, July 25th 2019

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Grand Ming Group Holdings's earnings per share have dropped 21% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 6 years ago, Grand Ming Group Holdings has lifted its dividend by approximately 16% a year on average.

Final Takeaway

Should investors buy Grand Ming Group Holdings for the upcoming dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

Want to learn more about Grand Ming Group Holdings? Here's a visualisation of its historical rate of revenue and earnings growth.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.