It looks like Golden Resources Development International Limited (HKG:677) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Golden Resources Development International's shares before the 13th of December to receive the dividend, which will be paid on the 17th of January.
The company's next dividend payment will be HK$0.011 per share, and in the last 12 months, the company paid a total of HK$0.023 per share. Last year's total dividend payments show that Golden Resources Development International has a trailing yield of 5.9% on the current share price of HK$0.39. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Golden Resources Development International can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Golden Resources Development International
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Golden Resources Development International distributed an unsustainably high 189% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.
It's good to see that while Golden Resources Development International's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Golden Resources Development International's earnings have been skyrocketing, up 35% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Golden Resources Development International's dividend payments are broadly unchanged compared to where they were 10 years ago.
The Bottom Line
Should investors buy Golden Resources Development International for the upcoming dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Golden Resources Development International is paying out so much of its profit. All things considered, we are not particularly enthused about Golden Resources Development International from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Golden Resources Development International has 4 warning signs we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.