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It looks like Country Garden Holdings Company Limited (HKG:2007) is about to go ex-dividend in the next 3 days. You will need to purchase shares before the 12th of September to receive the dividend, which will be paid on the 22nd of November.
Country Garden Holdings's upcoming dividend is CN¥0.23 a share, following on from the last 12 months, when the company distributed a total of CN¥0.53 per share to shareholders. Calculating the last year's worth of payments shows that Country Garden Holdings has a trailing yield of 5.7% on the current share price of HK$10.36. 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 Country Garden Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Country Garden 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. Fortunately Country Garden Holdings's payout ratio is modest, at just 30% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Country Garden 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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Country Garden Holdings's earnings have been skyrocketing, up 31% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.