Should You Buy HKR International Limited (HKG:480) For Its Upcoming Dividend?

HKR International Limited (HKG:480) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 1st of December to receive the dividend, which will be paid on the 21st of December.

HKR International's next dividend payment will be HK$0.04 per share, on the back of last year when the company paid a total of HK$0.12 to shareholders. Calculating the last year's worth of payments shows that HKR International has a trailing yield of 3.4% on the current share price of HK$3.51. 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! So we need to investigate whether HKR International can afford its dividend, and if the dividend could grow.

Check out our latest analysis for HKR International

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. HKR International paid out just 13% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.

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 how much of its profit HKR International paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, HKR International's earnings per share have been growing at 13% a year for the past five years. HKR International is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. HKR International has delivered 1.0% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is HKR International worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, HKR International paid out less than half its earnings and a bit over half its free cash flow. HKR International looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks HKR International is facing. Every company has risks, and we've spotted 3 warning signs for HKR International (of which 1 is potentially serious!) you should know about.

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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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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