Dividend Investors: Don't Be Too Quick To Buy Wong's International Holdings Limited (HKG:99) For Its Upcoming Dividend
Readers hoping to buy Wong's International Holdings Limited (HKG:99) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Wong's International Holdings' shares on or after the 4th of June, you won't be eligible to receive the dividend, when it is paid on the 25th of June.
The company's next dividend payment will be HK$0.02 per share. Last year, in total, the company distributed HK$0.047 to shareholders. Last year's total dividend payments show that Wong's International Holdings has a trailing yield of 3.7% on the current share price of HK$1.30. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are 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. Wong's International Holdings reported a loss last year, so it's not great to see that it has continued paying a dividend. 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 Wong's International Holdings 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 15% of its free cash flow in the last year.
See our latest analysis for Wong's International Holdings
Click here to see how much of its profit Wong's International Holdings paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Wong's International Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wong's International Holdings's dividend payments per share have declined at 4.5% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Get our latest analysis on Wong's International Holdings's balance sheet health here.
To Sum It Up
Is Wong's International Holdings an attractive dividend stock, or better left on the shelf? It's hard to get used to Wong's International Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
Although, if you're still interested in Wong's International Holdings and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 3 warning signs for Wong's International Holdings (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.
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.