Nasdaq
华尔街日报Don't Race Out To Buy Golden Resources Development International Limited (HKG:677) Just Because It's Going Ex-Dividend
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 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Golden Resources Development International's shares before the 12th of December in order to be eligible for the dividend, which will be paid on the 16th 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. Based on the last year's worth of payments, Golden Resources Development International stock has a trailing yield of around 6.5% on the current share price of HK$0.355. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Golden Resources Development International paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Golden Resources Development International didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 20% of its free cash flow in the last year.
Check out our latest analysis for Golden Resources Development International
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. Golden Resources Development International reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Golden Resources Development International's dividend payments are effectively flat on where they were 10 years ago.
Remember, you can always get a snapshot of Golden Resources Development International's financial health, by checking our visualisation of its financial health, here.
To Sum It Up
From a dividend perspective, should investors buy or avoid Golden Resources Development International? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
With that being said, if you're still considering Golden Resources Development International as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 3 warning signs we've spotted with Golden Resources Development International (including 1 which is significant).
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.