Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Luks Group (Vietnam Holdings) Company Limited (HKG:366) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase Luks Group (Vietnam Holdings)'s shares before the 17th of September to receive the dividend, which will be paid on the 8th of October.
The company's next dividend payment will be HK$0.03 per share, on the back of last year when the company paid a total of HK$0.06 to shareholders. Last year's total dividend payments show that Luks Group (Vietnam Holdings) has a trailing yield of 4.4% on the current share price of HK$1.36. 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 Luks Group (Vietnam Holdings) has been able to grow its dividends, or if the dividend might be cut.
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 Luks Group (Vietnam Holdings)'s payout ratio is modest, at just 41% of profit. A useful secondary check can be to evaluate whether Luks Group (Vietnam Holdings) generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 27% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Luks Group (Vietnam Holdings)'s earnings are down 3.7% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Luks Group (Vietnam Holdings)'s dividend payments are effectively flat on 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.
To Sum It Up
Is Luks Group (Vietnam Holdings) worth buying for its dividend? Luks Group (Vietnam Holdings) has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. All things considered, we are not particularly enthused about Luks Group (Vietnam Holdings) from a dividend perspective.
In light of that, while Luks Group (Vietnam Holdings) has an appealing dividend, it's worth knowing the risks involved with this stock. To that end, you should learn about the 3 warning signs we've spotted with Luks Group (Vietnam Holdings) (including 1 which is significant).
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. 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.
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