It looks like Fujikon Industrial Holdings Limited (HKG:927) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 7th of December will not receive this dividend, which will be paid on the 29th of December.
Fujikon Industrial Holdings's upcoming dividend is HK$0.02 a share, following on from the last 12 months, when the company distributed a total of HK$0.05 per share to shareholders. Last year's total dividend payments show that Fujikon Industrial Holdings has a trailing yield of 5.4% on the current share price of HK$0.93. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fujikon Industrial Holdings lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fujikon Industrial Holdings reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Fujikon Industrial Holdings has seen its dividend decline 8.4% per annum on average over the past 10 years, which is not great to see.
Is Fujikon Industrial Holdings worth buying for its dividend? It's hard to get used to Fujikon Industrial Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Fujikon Industrial Holdings's dividend merits.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for Fujikon Industrial Holdings you should be aware of.
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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Fujikon Industrial Holdings
Fujikon Industrial Holdings Limited, an investment holding company, designs, manufactures, markets, and trades in electro-acoustic products, accessories, and other electronic products in Hong Kong and China.
Flawless balance sheet and slightly overvalued.