Why You Might Be Interested In Wenzhou Kangning Hospital Co., Ltd. (HKG:2120) For Its Upcoming Dividend

It looks like Wenzhou Kangning Hospital Co., Ltd. (HKG:2120) is about to go ex-dividend in the next four days. 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. In other words, investors can purchase Wenzhou Kangning Hospital's shares before the 16th of October in order to be eligible for the dividend, which will be paid on the 18th of November.

The company's upcoming dividend is CN¥0.15 a share, following on from the last 12 months, when the company distributed a total of CN¥0.59 per share to shareholders. Looking at the last 12 months of distributions, Wenzhou Kangning Hospital has a trailing yield of approximately 4.8% on its current stock price of HK$13.70. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Wenzhou Kangning Hospital

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. Fortunately Wenzhou Kangning Hospital's payout ratio is modest, at just 36% of profit. 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. Over the last year it paid out 63% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Wenzhou Kangning Hospital 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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Wenzhou Kangning Hospital, with earnings per share up 3.3% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, eight years ago, Wenzhou Kangning Hospital has lifted its dividend by approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Wenzhou Kangning Hospital worth buying for its dividend? Earnings per share have been growing at a steady rate, and Wenzhou Kangning Hospital paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, it's hard to get excited about Wenzhou Kangning Hospital from a dividend perspective.

On that note, you'll want to research what risks Wenzhou Kangning Hospital is facing. To help with this, we've discovered 2 warning signs for Wenzhou Kangning Hospital (1 is concerning!) that you ought to be aware of before buying the shares.

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