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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Yangzijiang Financial Holding Ltd. (SGX:YF8) is about to trade ex-dividend in the next two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Yangzijiang Financial Holding's shares on or after the 24th of April will not receive the dividend, which will be paid on the 3rd of May.
The company's next dividend payment will be S$0.022 per share. Last year, in total, the company distributed S$0.022 to shareholders. Looking at the last 12 months of distributions, Yangzijiang Financial Holding has a trailing yield of approximately 6.8% on its current stock price of S$0.325. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Yangzijiang Financial Holding can afford its dividend, and if the dividend could grow.
See our latest analysis for Yangzijiang Financial Holding
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. Fortunately Yangzijiang Financial Holding's payout ratio is modest, at just 40% of profit.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit Yangzijiang Financial Holding 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Yangzijiang Financial Holding's earnings per share have dropped 8.0% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Unfortunately Yangzijiang Financial Holding has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.