Income Investors Should Know That PC Partner Group Limited (HKG:1263) Goes Ex-Dividend Soon

PC Partner Group Limited (HKG:1263) stock is about to trade ex-dividend in three 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. This means that investors who purchase PC Partner Group's shares on or after the 14th of September will not receive the dividend, which will be paid on the 6th of October.

The company's next dividend payment will be HK$0.10 per share. Last year, in total, the company distributed HK$0.20 to shareholders. Based on the last year's worth of payments, PC Partner Group stock has a trailing yield of around 6.0% on the current share price of HK$3.32. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether PC Partner Group can afford its dividend, and if the dividend could grow.

See our latest analysis for PC Partner Group

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. PC Partner Group lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. 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 cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 44% of its free cash flow in the past year.

Click here to see how much of its profit PC Partner Group paid out over the last 12 months.

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. PC Partner Group 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. PC Partner Group has delivered an average of 13% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Remember, you can always get a snapshot of PC Partner Group's financial health, by checking our visualisation of its financial health, here.

Final Takeaway

Is PC Partner Group worth buying for its 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. Overall, it's hard to get excited about PC Partner Group from a dividend perspective.

In light of that, while PC Partner Group has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for PC Partner Group you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.