SmarTone Telecommunications Holdings Limited (HKG:315) Stock Goes Ex-Dividend In Just Three Days

It looks like SmarTone Telecommunications Holdings Limited (HKG:315) is about to go ex-dividend in the next three days. If you purchase the stock on or after the 5th of March, you won't be eligible to receive this dividend, when it is paid on the 18th of March.

SmarTone Telecommunications Holdings's next dividend payment will be HK$0.14 per share, on the back of last year when the company paid a total of HK$0.29 to shareholders. Based on the last year's worth of payments, SmarTone Telecommunications Holdings has a trailing yield of 6.0% on the current stock price of HK$4.91. If you buy this business for its dividend, you should have an idea of whether SmarTone Telecommunications Holdings's dividend is reliable and sustainable. 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.

See our latest analysis for SmarTone Telecommunications 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. It paid out 87% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. 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 28% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that SmarTone Telecommunications Holdings'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.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. SmarTone Telecommunications Holdings's earnings per share have fallen at approximately 18% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SmarTone Telecommunications Holdings has delivered 5.7% dividend growth per year on average over the past 10 years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. SmarTone Telecommunications Holdings is already paying out 87% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

The Bottom Line

Has SmarTone Telecommunications Holdings got what it takes to maintain its dividend payments? 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 hard to get excited about SmarTone Telecommunications Holdings from a dividend perspective.

So if you want to do more digging on SmarTone Telecommunications Holdings, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 1 warning sign for SmarTone Telecommunications Holdings and you should be aware of it before buying any shares.

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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