Three Days Left Until Lee's Pharmaceutical Holdings Limited (HKG:950) Trades Ex-Dividend
Readers hoping to buy Lee's Pharmaceutical Holdings Limited (HKG:950) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Lee's Pharmaceutical Holdings investors that purchase the stock on or after the 25th of September will not receive the dividend, which will be paid on the 16th of October.
The company's next dividend payment will be HK$0.035 per share. Last year, in total, the company distributed HK$0.045 to shareholders. Calculating the last year's worth of payments shows that Lee's Pharmaceutical Holdings has a trailing yield of 3.7% on the current share price of HK$1.21. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Lee's Pharmaceutical Holdings's payout ratio is modest, at just 29% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for Lee's Pharmaceutical Holdings
Click here to see how much of its profit Lee's Pharmaceutical Holdings paid out over the last 12 months.
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 Lee's Pharmaceutical Holdings's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Lee's Pharmaceutical Holdings has seen its dividend decline 8.0% per annum on average over the past 10 years, which is not great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid Lee's Pharmaceutical Holdings? While it's not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. Overall, it's hard to get excited about Lee's Pharmaceutical Holdings from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 3 warning signs for Lee's Pharmaceutical Holdings (1 shouldn't be ignored) you should be aware of.
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.