CK Asset Holdings Limited (HKG: 1113) is set to trade excluding dividend within the next 4 days. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. In other words, investors can buy shares of CK Asset Holdings before September 6 in order to qualify for the dividend, which will be paid on September 16.
The company’s next dividend payment will be HK $ 0.41 per share, and over the past 12 months the company has paid a total of HK $ 1.87 per share. Calculation of the value of payments from last year shows that CK Asset Holdings has a rolling 3.7% return on the current share price of HK $ 51.1. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. You have to see if the dividend is covered by profits and if it increases.
See our latest analysis for CK Asset Holdings
Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. CK Asset Holdings paid a comfortable 38% of its profits last year. Yet cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. In the past year, it has paid more than three-quarters (81%) of its generated free cash flow, which is quite high and could start to limit reinvestment in the business.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. That’s why it’s a relief to see CK Asset Holdings’ earnings per share increase by 2.2% per year over the past five years. A payout ratio of 38% sounds like an unspoken signal from management that the opportunities for reinvestment in the business are low. In line with the limited earnings growth in recent years, this is not the most attractive combination.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. CK Asset Holdings has generated an average annual increase of 18% per annum in its dividend, based on the last six years of dividend payments. It is encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.
Is CK Asset Holdings an attractive dividend-paying stock, or better left out? Earnings per share have grown at a constant rate and CK Asset Holdings has paid less than half of its earnings and more than half of its free cash flow as dividends over the past year. In summary, although it has some positive characteristics, we are not inclined to rush and buy CK Asset Holdings today.
In light of this, although CK Asset Holdings has an attractive dividend, it is worth knowing the risks of this stock. For example, we found 1 warning sign for CK Asset Holdings which we recommend that you consider before investing in the business.
If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St does not have any position in the mentioned stocks.
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