It looks like Kingboard Laminates Holdings Limited (HKG:1888) is about to go ex-dividend in the next 3 days. You can purchase shares before the 4th of October in order to receive the dividend, which the company will pay on the 5th of November.

Kingboard Laminates Holdings's next dividend payment will be HK$0.1 per share, and in the last 12 months, the company paid a total of HK$0.5 per share. Looking at the last 12 months of distributions, Kingboard Laminates Holdings has a trailing yield of approximately 6.4% on its current stock price of HK$7.07. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Kingboard Laminates Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Kingboard Laminates Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Kingboard Laminates Holdings paid out more than half (54%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Kingboard Laminates Holdings generated enough free cash flow to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Kingboard Laminates 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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Kingboard Laminates Holdings's earnings per share have risen 16% per annum over the last five years. Kingboard Laminates Holdings is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Kingboard Laminates Holdings has increased its dividend at approximately 7.4% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Kingboard Laminates Holdings for the upcoming dividend? We like Kingboard Laminates Holdings's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

Curious what other investors think of Kingboard Laminates Holdings? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.