Be Sure To Check Out Asia Allied Infrastructure Holdings Limited (HKG:711) Before It Goes Ex-Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Asia Allied Infrastructure Holdings Limited (HKG:711) is about to trade ex-dividend in the next four days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Asia Allied Infrastructure Holdings' shares on or after the 25th of August will not receive the dividend, which will be paid on the 14th of September.
The company's next dividend payment will be HK$0.0127 per share, on the back of last year when the company paid a total of HK$0.025 to shareholders. Looking at the last 12 months of distributions, Asia Allied Infrastructure Holdings has a trailing yield of approximately 9.5% on its current stock price of HK$0.44. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
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 Asia Allied Infrastructure Holdings paying out a modest 29% 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. It paid out 1.3% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Asia Allied Infrastructure 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.
See our latest analysis for Asia Allied Infrastructure Holdings
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Asia Allied Infrastructure Holdings's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Earnings per share growth in recent times has not been a standout. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, Asia Allied Infrastructure Holdings has lifted its dividend by approximately 1.1% a year on average.
To Sum It Up
Should investors buy Asia Allied Infrastructure Holdings for the upcoming dividend? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but Asia Allied Infrastructure Holdings is halfway there. There's a lot to like about Asia Allied Infrastructure Holdings, and we would prioritise taking a closer look at it.
In light of that, while Asia Allied Infrastructure Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Asia Allied Infrastructure Holdings and you should be aware of these before buying any shares.
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.