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Vanke Overseas Investment Holding Company Limited (HKG:1036) Pays A HK$0.09 Dividend In Just 2 Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Vanke Overseas Investment Holding Company Limited (HKG:1036) is about to go ex-dividend in just 2 days. You will need to purchase shares before the 28th of May to receive the dividend, which will be paid on the 10th of June.

Vanke Overseas Investment Holding's next dividend payment will be HK$0.09 per share. Last year, in total, the company distributed HK$0.09 to shareholders. Based on the last year's worth of payments, Vanke Overseas Investment Holding has a trailing yield of 3.2% on the current stock price of HK$2.85. 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.

View our latest analysis for Vanke Overseas Investment Holding

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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. That's why it's good to see Vanke Overseas Investment Holding paying out a modest 26% of its earnings. A useful secondary check can be to evaluate whether Vanke Overseas Investment Holding generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Vanke Overseas Investment Holding'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.

Click here to see how much of its profit Vanke Overseas Investment Holding paid out over the last 12 months.

SEHK:1036 Historical Dividend Yield May 25th 2020
SEHK:1036 Historical Dividend Yield May 25th 2020

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Vanke Overseas Investment Holding's earnings per share have fallen at approximately 8.3% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Vanke Overseas Investment Holding's dividend payments per share have declined at 16% per year on average over the past ten years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Should investors buy Vanke Overseas Investment Holding for the upcoming dividend? Vanke Overseas Investment Holding has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Vanke Overseas Investment Holding looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while Vanke Overseas Investment Holding looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with Vanke Overseas Investment Holding and understanding them should be part of your investment process.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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. Thank you for reading.