Chinney Investments, Limited (HKG:216) the stock is set to trade ex-dividend in 3 days. The ex-dividend date is one business day before the record date, which is the deadline by which shareholders must be present on the books of the company to be eligible for payment of a dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement that does not appear on the record date. Therefore, if you buy shares of Chinney Investments on or after August 30, you will not be eligible to receive the dividend when it is paid on September 29.
The company’s next dividend is HK$0.05 per share, following the last 12 months, when the company distributed a total of HK$0.05 per share to shareholders. Calculating the value of last year’s payouts shows that Chinney Investments has a 3.6% return on the current share price of HK$1.37. If you’re buying this company for its dividend, you should have some idea of the reliability and sustainability of Chinney Investments’ dividend. We therefore need to consider whether Chinney Investments can afford its dividend and whether the dividend could increase.
Check out our latest analysis for Chinney Investments
Dividends are usually paid out of company profits. If a company pays out more dividends than it earns in profits, then the dividend could be unsustainable. Fortunately, Chinney Investments’ payout ratio is modest at just 49% of earnings. A useful secondary check may be to assess whether Chinney Investments has generated enough free cash flow to pay its dividend. It paid out 10% of its free cash flow as dividends last year, which is conservatively low.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see how much of its profits Chinney Investments has paid out over the past 12 months.
Have earnings and dividends increased?
Companies with declining profits are tricky from a dividend perspective. If earnings fall enough, the company could be forced to cut its dividend. Earnings per share at Chinney Investments have fallen about 33% annually over the previous five years.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. It appears that Chinney Investments dividends are largely the same as 10 years ago. If a company’s dividend remains stable while profits are falling, it is usually a sign that it is paying out a higher percentage of its profits. This can become unsustainable if revenues drop enough.
Should Investors Buy Chinney Investments for the Next Dividend? Chinney Investments has comfortably low cash and earnings payout ratios, which can mean the dividend is sustainable even in the face of a sharp drop in earnings per share. Nevertheless, we consider the decline in earnings to be a warning sign. Overall, it’s hard to get excited about Chinney Investments from a dividend perspective.
In light of this, although Chinney Investments has an attractive dividend, it is worth knowing the risks associated with this stock. We have identified 3 warning signs with Chinney Investments (at least 1 which we don’t like too much), and understanding them should be part of your investment process.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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