Ngai Hing Hong Company Limited (HKG:1047) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Ngai Hing Hong Company Limited (HKG:1047) is about to go ex-dividend in just four days. You will need to purchase shares before the 22nd of March to receive the dividend, which will be paid on the 12th of April.

Ngai Hing Hong's next dividend payment will be HK$0.02 per share, and in the last 12 months, the company paid a total of HK$0.02 per share. Based on the last year's worth of payments, Ngai Hing Hong stock has a trailing yield of around 4.1% on the current share price of HK$0.49. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Ngai Hing Hong

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. Ngai Hing Hong has a low and conservative payout ratio of just 12% of its income after tax.

Click here to see how much of its profit Ngai Hing Hong paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Ngai Hing Hong earnings per share are up 3.7% per annum over the last five years. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ngai Hing Hong's dividend payments per share have declined at 6.7% per year on average over the past 10 years, which is uninspiring. Ngai Hing Hong 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.

The Bottom Line

Should investors buy Ngai Hing Hong for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Ngai Hing Hong 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 Ngai Hing Hong for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 4 warning signs for Ngai Hing Hong that you should be aware of before investing in their shares.

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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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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