Why You Might Be Interested In Eagle Nice (International) Holdings Limited (HKG:2368) For Its Upcoming Dividend

Readers hoping to buy Eagle Nice (International) Holdings Limited (HKG:2368) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 30th of November to receive the dividend, which will be paid on the 17th of December.

Eagle Nice (International) Holdings's next dividend payment will be HK$0.30 per share, on the back of last year when the company paid a total of HK$0.29 to shareholders. Looking at the last 12 months of distributions, Eagle Nice (International) Holdings has a trailing yield of approximately 6.3% on its current stock price of HK$4.63. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Eagle Nice (International) Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Eagle Nice (International) Holdings

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. Eagle Nice (International) Holdings paid out more than half (70%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Eagle Nice (International) Holdings generated enough free cash flow to afford its dividend. It distributed 45% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Eagle Nice (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 how much of its profit Eagle Nice (International) Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Eagle Nice (International) Holdings has grown its earnings rapidly, up 21% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Eagle Nice (International) Holdings has lifted its dividend by approximately 3.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

From a dividend perspective, should investors buy or avoid Eagle Nice (International) Holdings? Eagle Nice (International) Holdings'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. Eagle Nice (International) Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for Eagle Nice (International) Holdings that we recommend you consider before investing in the business.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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