Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Beijing Jingkelong Company Limited (HKG: 814) is set to trade ex-dividend within the next 4 days. Typically, the ex-dividend date is one business day prior to the record date which is the date a company determines which shareholders are eligible to receive a dividend. It is important to know the ex-dividend date, as any transaction in the share must have been settled by the registration date at the latest. As a result, Beijing Jingkelong investors who buy the shares on or after May 27 will not receive the dividend, which will be paid on July 20.
The company’s next dividend will be CNY 0.10 per share, at the end of last year, when the company paid a total of CNY 0.10 to shareholders. Calculation of the value of last year’s payouts shows that Beijing Jingkelong has a final return of 9.9% on the current share price of HK $ 1.22. Dividends make a large contribution to investment returns for long-term holders, but only if the dividend continues to be paid. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
Check out our latest analysis for Beijing Jingkelong
Dividends are generally paid out of company profits. If a company pays more in dividends than it earned in profits, then the dividend could be unsustainable. Beijing Jingkelong paid more than half (66%) of its profits last year, which is a steady payout ratio for most companies. A useful secondary check may be to assess whether Beijing Jingkelong has generated enough free cash flow to pay its dividend. Fortunately, he only paid 20% of his free cash flow last year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t fall precipitously.
Click here to see how much of its profits Beijing Jingkelong has paid in the past 12 months.
Have profits and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to sell heavily at the same time. This is why it is heartwarming to see Beijing Jingkelong’s profits soar, rising 20% ââper year over the past five years. Management seems to strike a good balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, reinvested earnings and some earnings growth, Beijing Jingkelong could have strong prospects for future dividend increases.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Beijing Jingkelong’s dividend payouts per share have declined 6.7% per year on average over the past 10 years, which is not interesting. It is unusual to see earnings per share increase at the same time as dividends per share decrease. We hope this is because the company is reinvesting heavily in its business, but it could also suggest that the business is lumpy.
Does Beijing Jingkelong have what it takes to maintain its dividend payments? We like Beijing Jingkelong’s earnings per share growth and the fact that although its payout ratio is around average, it paid a lower percentage of its cash flow. Overall, we think this is an engaging combination worthy of further research.
In light of this, while Beijing Jingkelong has an attractive dividend, it is worth knowing the risks of this stock. For example, we have identified 4 warning signs for Beijing Jingkelong (1 cannot be ignored) that you should be aware of.
If you are looking for dividend paying stocks, we recommend that you take a look at our list of top dividend paying stocks with a yield above 2% and a future dividend.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take into account your goals or your financial situation. We aim to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative information. Simply Wall St has no position in any of the stocks mentioned.
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