We Wouldn't Be Too Quick To Buy Golden Resources Development International Limited (HKG:677) Before It Goes Ex-Dividend

Readers hoping to buy Golden Resources Development International Limited (HKG:677) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 10th of December in order to receive the dividend, which the company will pay on the 6th of January.

Golden Resources Development International's upcoming dividend is HK$0.011 a share, following on from the last 12 months, when the company distributed a total of HK$0.023 per share to shareholders. Looking at the last 12 months of distributions, Golden Resources Development International has a trailing yield of approximately 4.0% on its current stock price of HK$0.58. If you buy this business for its dividend, you should have an idea of whether Golden Resources Development International's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Golden Resources Development International

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. Golden Resources Development International's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. 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. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.

Click here to see how much of its profit Golden Resources Development International paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Golden Resources Development International reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Golden Resources Development International's dividend payments are broadly unchanged compared to where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Remember, you can always get a snapshot of Golden Resources Development International's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is Golden Resources Development International an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering Golden Resources Development International as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that Golden Resources Development International is showing 2 warning signs in our investment analysis, and 1 of those is concerning...

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.
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