Uni-President China Holdings Ltd (HKG:220) Will Pay A CN¥0.4245 Dividend In Four Days

It looks like Uni-President China Holdings Ltd (HKG:220) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Uni-President China Holdings' shares before the 4th of June in order to be eligible for the dividend, which will be paid on the 19th of June.

The company's next dividend payment will be CN¥0.4245 per share, and in the last 12 months, the company paid a total of CN¥0.42 per share. Looking at the last 12 months of distributions, Uni-President China Holdings has a trailing yield of approximately 6.6% on its current stock price of HK$7.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Uni-President China Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Uni-President China Holdings paid out 110% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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. It paid out more than half (70%) of its free cash flow in the past year, which is within an average range for most companies.

It's good to see that while Uni-President China Holdings's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Uni-President China Holdings's earnings per share have been growing at 10% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Uni-President China Holdings has increased its dividend at approximately 24% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Uni-President China Holdings? Uni-President China Holdings has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you want to look further into Uni-President China Holdings, it's worth knowing the risks this business faces. For example - Uni-President China Holdings has 2 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.