Only Four Days Left To Cash In On Yau Lee Holdings' (HKG:406) Dividend

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 Yau Lee Holdings Limited (HKG:406) is about to go ex-dividend in just four days. You can purchase shares before the 14th of December in order to receive the dividend, which the company will pay on the 8th of January.

Yau Lee Holdings's next dividend payment will be HK$0.01 per share. Last year, in total, the company distributed HK$0.025 to shareholders. Calculating the last year's worth of payments shows that Yau Lee Holdings has a trailing yield of 2.4% on the current share price of HK$1.03. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Yau Lee Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Yau Lee Holdings paid out a comfortable 40% of its profit last year. 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. Fortunately, it paid out only 32% of its free cash flow in the past year.

It's positive to see that Yau Lee 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 Yau Lee Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Yau Lee Holdings's earnings per share have fallen at approximately 19% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Yau Lee Holdings has lifted its dividend by approximately 6.9% a year on average.

To Sum It Up

Has Yau Lee Holdings got what it takes to maintain its dividend payments? Yau Lee Holdings has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So while Yau Lee Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Yau Lee Holdings has 4 warning signs (and 1 which is concerning) we think you should know about.

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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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.
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