Be Sure To Check Out The United Laboratories International Holdings Limited (HKG:3933) Before It Goes Ex-Dividend

By
Simply Wall St
Published
July 01, 2021
SEHK:3933
Source: Shutterstock

It looks like The United Laboratories International Holdings Limited (HKG:3933) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase United Laboratories International Holdings' shares before the 6th of July to receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be CN¥0.08 per share, on the back of last year when the company paid a total of CN¥0.08 to shareholders. Last year's total dividend payments show that United Laboratories International Holdings has a trailing yield of 1.5% on the current share price of HK$6.37. 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.

Check out our latest analysis for United Laboratories International Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. United Laboratories International Holdings has a low and conservative payout ratio of just 20% of its income after tax. A useful secondary check can be to evaluate whether United Laboratories International Holdings generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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SEHK:3933 Historic Dividend July 1st 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see United Laboratories International Holdings has grown its earnings rapidly, up 48% a year for the past five years. United Laboratories 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.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. United Laboratories International Holdings has seen its dividend decline 8.8% per annum on average over the past 10 years, which is not great to see. United Laboratories 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.

Final Takeaway

Is United Laboratories International Holdings an attractive dividend stock, or better left on the shelf? United Laboratories International Holdings has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

Wondering what the future holds for United Laboratories International Holdings? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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