Longfor Group Holdings Limited (HKG:960) is about to trade ex-dividend in the next 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Longfor Group Holdings' shares before the 24th of February in order to be eligible for the dividend, which will be paid on the 8th of April.
The company's next dividend payment will be CN¥0.22 per share, on the back of last year when the company paid a total of CN¥0.55 to shareholders. Last year's total dividend payments show that Longfor Group Holdings has a trailing yield of 4.6% on the current share price of HK$10.20. If you buy this business for its dividend, you should have an idea of whether Longfor Group Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Longfor Group Holdings
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. That's why it's good to see Longfor Group Holdings paying out a modest 27% of its earnings. 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. Luckily it paid out just 7.0% of its free cash flow last year.
It's positive to see that Longfor Group Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Longfor Group Holdings's earnings per share have dropped 11% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Longfor Group Holdings has increased its dividend at approximately 6.8% a year on average.
The Bottom Line
Is Longfor Group Holdings worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
While it's tempting to invest in Longfor Group Holdings for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Longfor Group Holdings that we strongly recommend you have a look at before investing in the company.
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.