Readers hoping to buy Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (HKG:520) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 9th of October will not receive the dividend, which will be paid on the 24th of October.
Xiabuxiabu Catering Management (China) Holdings's upcoming dividend is HK$0.06 a share, following on from the last 12 months, when the company distributed a total of HK$0.2 per share to shareholders. Looking at the last 12 months of distributions, Xiabuxiabu Catering Management (China) Holdings has a trailing yield of approximately 1.9% on its current stock price of HK$10.3. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
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. Fortunately Xiabuxiabu Catering Management (China) Holdings's payout ratio is modest, at just 40% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.
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. For this reason, we're glad to see Xiabuxiabu Catering Management (China) Holdings's earnings per share have risen 18% per annum over the last five years. Xiabuxiabu Catering Management (China) Holdings is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, five years ago, Xiabuxiabu Catering Management (China) Holdings has lifted its dividend by approximately 13% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Should investors buy Xiabuxiabu Catering Management (China) Holdings for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Xiabuxiabu Catering Management (China) Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Wondering what the future holds for Xiabuxiabu Catering Management (China) Holdings? See what the 14 analysts we track 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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If you spot an error that warrants correction, please contact the editor at email@example.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.