The United Laboratories International Holdings Limited (HKG:3933) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

The United Laboratories International Holdings Limited (HKG:3933) stock is about to trade ex-dividend in 3 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, United Laboratories International Holdings investors that purchase the stock on or after the 19th of September will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be CN¥0.16 per share. Last year, in total, the company distributed CN¥0.52 to shareholders. Last year's total dividend payments show that United Laboratories International Holdings has a trailing yield of 6.9% on the current share price of HK$8.88. 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 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 paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 52% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that United Laboratories International Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. It's encouraging to see United Laboratories International Holdings has grown its earnings rapidly, up 31% a year for the past five years.

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 delivered an average of 50% per year annual increase in its dividend, based on the past six years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Should investors buy United Laboratories International Holdings for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, United Laboratories International Holdings paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for United Laboratories International Holdings that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.