Stock Analysis

Safety Godown Company, Limited (HKG:237) Pays A HK$0.03 Dividend In Just Four Days

SEHK:237
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Safety Godown Company, Limited (HKG:237) is about to trade ex-dividend in the next 4 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Safety Godown Company's shares before the 16th of December to receive the dividend, which will be paid on the 15th of January.

The company's upcoming dividend is HK$0.03 a share, following on from the last 12 months, when the company distributed a total of HK$0.075 per share to shareholders. Looking at the last 12 months of distributions, Safety Godown Company has a trailing yield of approximately 3.9% on its current stock price of HK$1.90. 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.

View our latest analysis for Safety Godown Company

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. Safety Godown Company paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Safety Godown Company didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit Safety Godown Company paid out over the last 12 months.

historic-dividend
SEHK:237 Historic Dividend December 11th 2024

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Safety Godown Company was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Safety Godown Company has seen its dividend decline 4.6% per annum on average over the past 10 years, which is not great to see.

We update our analysis on Safety Godown Company every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Should investors buy Safety Godown Company for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy Safety Godown Company today.

On that note, you'll want to research what risks Safety Godown Company is facing. Every company has risks, and we've spotted 2 warning signs for Safety Godown Company you should know about.

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.