CSSC (Hong Kong) Shipping Company Limited (HKG:3877) Passed Our Checks, And It's About To Pay A HK$0.05 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CSSC (Hong Kong) Shipping Company Limited (HKG:3877) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. In other words, investors can purchase CSSC (Hong Kong) Shipping's shares before the 14th of October in order to be eligible for the dividend, which will be paid on the 30th of November.
The company's next dividend payment will be HK$0.05 per share, on the back of last year when the company paid a total of HK$0.10 to shareholders. Based on the last year's worth of payments, CSSC (Hong Kong) Shipping stock has a trailing yield of around 4.1% on the current share price of HK$2.46. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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. CSSC (Hong Kong) Shipping paid out a comfortable 32% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
View our latest analysis for CSSC (Hong Kong) Shipping
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, CSSC (Hong Kong) Shipping's earnings per share have been growing at 12% a year for the past five years.
CSSC (Hong Kong) Shipping also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, CSSC (Hong Kong) Shipping has lifted its dividend by approximately 7.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy CSSC (Hong Kong) Shipping for the upcoming dividend? Companies like CSSC (Hong Kong) Shipping that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, CSSC (Hong Kong) Shipping looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
In light of that, while CSSC (Hong Kong) Shipping has an appealing dividend, it's worth knowing the risks involved with this stock. To that end, you should learn about the 2 warning signs we've spotted with CSSC (Hong Kong) Shipping (including 1 which makes us a bit uncomfortable).
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.