Should You Buy PC Partner Group Limited (HKG:1263) For Its Upcoming Dividend?

Readers hoping to buy PC Partner Group Limited (HKG:1263) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days 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. 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. Accordingly, PC Partner Group investors that purchase the stock on or after the 17th of September will not receive the dividend, which will be paid on the 10th of October.

The company's upcoming dividend is HK$0.25 a share, following on from the last 12 months, when the company distributed a total of HK$0.35 per share to shareholders. Looking at the last 12 months of distributions, PC Partner Group has a trailing yield of approximately 5.3% on its current stock price of HK$6.66. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether PC Partner Group has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. PC Partner Group paid out a comfortable 49% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 8.6% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that PC Partner Group'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.

See our latest analysis for PC Partner Group

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?

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see PC Partner Group has grown its earnings rapidly, up 97% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, PC Partner Group has lifted its dividend by approximately 23% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy PC Partner Group for the upcoming dividend? PC Partner Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about PC Partner Group, and we would prioritise taking a closer look at it.

In light of that, while PC Partner Group has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that PC Partner Group is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.