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Hengdeli Holdings Limited (HKG:3389) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 29th of August in order to be eligible for this dividend, which will be paid on the 13th of September.
The upcoming dividend for Hengdeli Holdings will put a total of CN¥0.038 per share in shareholders' pockets, up from last year's total dividends of CN¥0.012. If you buy this business for its dividend, you should have an idea of whether Hengdeli Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Hengdeli 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. Its dividend payout ratio is 82% 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.
Click here to see how much of its profit Hengdeli Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Hengdeli Holdings's earnings per share have fallen at approximately 29% a year over the previous 5 years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hengdeli Holdings's dividend payments per share have declined at 9.9% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Final Takeaway
From a dividend perspective, should investors buy or avoid Hengdeli Holdings? 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. To summarise, Hengdeli Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.
Curious about whether Hengdeli Holdings has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.