Stock Analysis

Arts Optical International Holdings Limited (HKG:1120) Looks Interesting, And It's About To Pay A Dividend

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SEHK:1120
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Readers hoping to buy Arts Optical International Holdings Limited (HKG:1120) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase Arts Optical International Holdings' shares on or after the 12th of June, you won't be eligible to receive the dividend, when it is paid on the 30th of June.

The upcoming dividend for Arts Optical International Holdings is HK$0.10 per share, increased from last year's total dividends per share of HK$0.05. 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! As a result, readers should always check whether Arts Optical International Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Arts Optical International Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Arts Optical International Holdings has a low and conservative payout ratio of just 17% of its income after tax.

Click here to see how much of its profit Arts Optical International Holdings paid out over the last 12 months.

historic-dividend
SEHK:1120 Historic Dividend June 7th 2023

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. That's why it's comforting to see Arts Optical International Holdings's earnings have been skyrocketing, up 39% per annum for the past five years. Arts Optical International Holdings earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Arts Optical International Holdings has seen its dividend decline 7.2% per annum on average over the past 10 years, which is not great to see. Arts Optical International Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

From a dividend perspective, should investors buy or avoid Arts Optical International Holdings? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Arts Optical International Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Arts Optical International Holdings for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Arts Optical International Holdings that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Arts Optical International Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.