Only Four Days Left To Cash In On CK Asset Holdings' (HKG:1113) Dividend

CK Asset Holdings Limited (HKG:1113) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase CK Asset Holdings' shares on or after the 18th of May, you won't be eligible to receive the dividend, when it is paid on the 3rd of June.

The company's upcoming dividend is HK$1.46 a share, following on from the last 12 months, when the company distributed a total of HK$1.80 per share to shareholders. Based on the last year's worth of payments, CK Asset Holdings stock has a trailing yield of around 3.6% on the current share price of HK$49.4. 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.

Check out our latest analysis for CK Asset 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. Fortunately CK Asset Holdings's payout ratio is modest, at just 41% of profit. A useful secondary check can be to evaluate whether CK Asset Holdings generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 33% 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.

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. 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 not encouraging to see that CK Asset Holdings's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. CK Asset Holdings has delivered an average of 17% per year annual increase in its dividend, based on the past six years of dividend payments.

To Sum It Up

From a dividend perspective, should investors buy or avoid CK Asset Holdings? While it's not great to see that earnings per share are effectively flat over the six-year period we checked, at least the payout ratios are low and conservative. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in CK Asset Holdings for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for CK Asset Holdings that we recommend you consider before investing in the business.

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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