In This Article:
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Eagle Nice (International) Holdings Limited (HKG:2368) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 22nd of August, you won't be eligible to receive this dividend, when it is paid on the 12th of September.
Eagle Nice (International) Holdings's next dividend payment will be HK$0.06 per share, and in the last 12 months, the company paid a total of HK$0.20 per share. Based on the last year's worth of payments, Eagle Nice (International) Holdings has a trailing yield of 8.9% on the current stock price of HK$2.25. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Eagle Nice (International) Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Eagle Nice (International) Holdings is paying out an acceptable 72% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out dividends equivalent to 371% of what it generated in free cash flow, a disturbingly high percentage. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
Eagle Nice (International) Holdings paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Eagle Nice (International) Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Eagle Nice (International) Holdings has grown its earnings rapidly, up 45% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.