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 EuroEyes International Eye Clinic Limited (HKG:1846) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase EuroEyes International Eye Clinic's shares before the 11th of June in order to be eligible for the dividend, which will be paid on the 28th of June.
The company's next dividend payment will be HK$0.0489 per share. Last year, in total, the company distributed HK$0.098 to shareholders. Based on the last year's worth of payments, EuroEyes International Eye Clinic stock has a trailing yield of around 2.0% on the current share price of HK$4.85. 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! As a result, readers should always check whether EuroEyes International Eye Clinic has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for EuroEyes International Eye Clinic
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately EuroEyes International Eye Clinic's payout ratio is modest, at just 25% of profit. A useful secondary check can be to evaluate whether EuroEyes International Eye Clinic generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 39% of the free cash flow it generated, which is a comfortable payout ratio.
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 EuroEyes International Eye Clinic's earnings have been skyrocketing, up 22% 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. EuroEyes International Eye Clinic has delivered an average of 48% per year annual increase in its dividend, based on the past three years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Has EuroEyes International Eye Clinic got what it takes to maintain its dividend payments? It's great that EuroEyes International Eye Clinic is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. EuroEyes International Eye Clinic looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of EuroEyes International Eye Clinic? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.