Tongguan Gold Group Limited (HKG:340) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tongguan Gold Group Limited (HKG:340) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Tongguan Gold Group investors that purchase the stock on or after the 11th of June will not receive the dividend, which will be paid on the 7th of July.
The company's upcoming dividend is HK$0.032 a share, following on from the last 12 months, when the company distributed a total of HK$0.032 per share to shareholders. Based on the last year's worth of payments, Tongguan Gold Group stock has a trailing yield of around 1.6% on the current share price of HK$1.99. If you buy this business for its dividend, you should have an idea of whether Tongguan Gold Group's dividend is reliable and sustainable. So we need to investigate whether Tongguan Gold Group can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tongguan Gold Group paid out just 17% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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 10% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Tongguan Gold Group'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 Tongguan Gold Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Tongguan Gold Group's earnings have been skyrocketing, up 51% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Tongguan Gold Group looks like a promising growth company.
Given that Tongguan Gold Group has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Is Tongguan Gold Group an attractive dividend stock, or better left on the shelf? We love that Tongguan Gold Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Tongguan Gold Group, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Tongguan Gold Group is facing. Case in point: We've spotted 1 warning sign for Tongguan Gold Group you should be aware of.
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.