Interested In SmarTone Telecommunications Holdings' (HKG:315) Upcoming HK$0.175 Dividend? You Have Four Days Left

SmarTone Telecommunications Holdings Limited (HKG:315) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Meaning, you will need to purchase SmarTone Telecommunications Holdings' shares before the 11th of November to receive the dividend, which will be paid on the 22nd of November.

The company's next dividend payment will be HK$0.175 per share. Last year, in total, the company distributed HK$0.32 to shareholders. Looking at the last 12 months of distributions, SmarTone Telecommunications Holdings has a trailing yield of approximately 7.5% on its current stock price of HK$4.24. 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 SmarTone Telecommunications Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for SmarTone Telecommunications Holdings

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. Its dividend payout ratio is 75% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 26% of its free cash flow as dividends, a comfortable payout level 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 SmarTone Telecommunications Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by SmarTone Telecommunications Holdings's 5.4% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SmarTone Telecommunications Holdings's dividend payments per share have declined at 1.2% per year on average over the past 10 years, which is uninspiring.

Final Takeaway

Should investors buy SmarTone Telecommunications Holdings for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you're not too concerned about SmarTone Telecommunications Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For instance, we've identified 2 warning signs for SmarTone Telecommunications Holdings (1 makes us a bit uncomfortable) you should be aware of.

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.