Yuexiu Transport Infrastructure Limited (HKG:1052) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 1st of June will not receive this dividend, which will be paid on the 29th of June.
Yuexiu Transport Infrastructure’s next dividend payment will be HK$0.21 per share, and in the last 12 months, the company paid a total of HK$0.35 per share. Calculating the last year’s worth of payments shows that Yuexiu Transport Infrastructure has a trailing yield of 7.4% on the current share price of HK$5.15. If you buy this business for its dividend, you should have an idea of whether Yuexiu Transport Infrastructure’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Yuexiu Transport Infrastructure paid out 51% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Yuexiu Transport Infrastructure generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 31% of the free cash flow it generated, which is a comfortable payout ratio.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we’re glad to see Yuexiu Transport Infrastructure’s earnings per share have risen 13% per annum over the last five years. Yuexiu Transport Infrastructure 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. In the last ten years, Yuexiu Transport Infrastructure has lifted its dividend by approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is Yuexiu Transport Infrastructure worth buying for its dividend? Yuexiu Transport Infrastructure’s growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
So while Yuexiu Transport Infrastructure looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we’ve spotted 2 warning signs for Yuexiu Transport Infrastructure (of which 1 makes us a bit uncomfortable!) you should know about.
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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.