Shenzhou International Group Holdings Limited (HKG:2313) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 6th of September will not receive the dividend, which will be paid on the 26th of September.
Shenzhou International Group Holdings’s upcoming dividend is CN¥0.90 a share, following on from the last 12 months, when the company distributed a total of CN¥1.58 per share to shareholders. Looking at the last 12 months of distributions, Shenzhou International Group Holdings has a trailing yield of approximately 1.6% on its current stock price of HK$106.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Shenzhou International Group Holdings paid out 51% of its earnings to investors last year, a normal payout level for most businesses. 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 84% 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 Shenzhou International 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.
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. Fortunately for readers, Shenzhou International Group Holdings’s earnings per share have been growing at 19% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we’d wonder why management are not reinvesting more in the business.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Shenzhou International Group Holdings has delivered 24% dividend growth per year on average over the past ten years. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Has Shenzhou International Group Holdings got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we’d also note that Shenzhou International Group Holdings is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, while it has some positive characteristics, we’re not inclined to race out and buy Shenzhou International Group Holdings today.
Wondering what the future holds for Shenzhou International Group Holdings? See what the 23 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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