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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Texhong Textile Group Limited (HKG:2678) is about to go ex-dividend in just 2 days. You will need to purchase shares before the 13th of May to receive the dividend, which will be paid on the 2nd of June.
Texhong Textile Group's next dividend payment will be HK$0.15 per share, on the back of last year when the company paid a total of HK$0.27 to shareholders. Calculating the last year's worth of payments shows that Texhong Textile Group has a trailing yield of 5.6% on the current share price of HK$5.38. 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 Texhong Textile Group can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Texhong Textile Group
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. That's why it's good to see Texhong Textile Group paying out a modest 31% of its earnings. A useful secondary check can be to evaluate whether Texhong Textile Group generated enough free cash flow to afford its dividend. Dividends consumed 59% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Texhong Textile Group's earnings have been skyrocketing, up 23% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, Texhong Textile Group has increased its dividend at approximately 16% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Texhong Textile Group worth buying for its dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Texhong Textile Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.