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Giordano International Limited (HKG:709) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 6th of September in order to be eligible for this dividend, which will be paid on the 20th of September.
Giordano International's next dividend payment will be HK$0.10 per share, on the back of last year when the company paid a total of HK$0.20 to shareholders. Based on the last year's worth of payments, Giordano International has a trailing yield of 8.3% on the current stock price of HK$2.45. 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.
See our latest analysis for Giordano International
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Giordano International paid out 109% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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. Giordano International paid out more free cash flow than it generated - 128%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Giordano International does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.
As Giordano International's dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Giordano International's earnings per share have fallen at approximately 10% a year over the previous 5 years. Such a sharp decline casts doubt on the future sustainability of the dividend.