Xtep International Holdings Limited (HKG:1368) Goes Ex-Dividend In 3 Days
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Xtep International Holdings Limited (HKG:1368) is about to go ex-dividend in just 3 days. This means that investors who purchase shares on or after the 13th of May will not receive the dividend, which will be paid on the 26th of June.
Xtep International Holdings's next dividend payment will be HK$0.075 per share, on the back of last year when the company paid a total of HK$0.17 to shareholders. Calculating the last year's worth of payments shows that Xtep International Holdings has a trailing yield of 6.3% on the current share price of HK$3.04. 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 investigate whether Xtep International Holdings can afford its dividend, and if the dividend could grow.
See our latest analysis for Xtep International Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Xtep International Holdings paid out 57% of its earnings to investors last year, a normal payout level for most businesses. 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. Dividends consumed 64% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Xtep International 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 the company's payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Xtep International Holdings earnings per share are up 7.0% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Xtep International Holdings also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Xtep International Holdings has delivered 3.4% dividend growth per year on average over the past ten years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
From a dividend perspective, should investors buy or avoid Xtep International Holdings? Earnings per share have been growing modestly and Xtep International Holdings paid out a bit over half of its earnings and free cash flow last year. To summarise, Xtep International Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.
If you want to look further into Xtep International Holdings, it's worth knowing the risks this business faces. Our analysis shows 2 warning signs for Xtep International Holdings and you should be aware of them before buying any shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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