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Should Income Investors Look At Xinghua Port Holdings Ltd. (HKG:1990) Before Its Ex-Dividend?

Readers hoping to buy Xinghua Port Holdings Ltd. (HKG:1990) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 10th of April, you won't be eligible to receive this dividend, when it is paid on the 24th of June.

The upcoming dividend for Xinghua Port Holdings is HK$0.05 per share, increased from last year's total dividends per share of HK$0.046. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Xinghua Port Holdings

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. That's why it's good to see Xinghua Port Holdings paying out a modest 48% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (55%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Xinghua Port Holdings'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 Xinghua Port Holdings paid out over the last 12 months.

SEHK:1990 Historical Dividend Yield April 6th 2020
SEHK:1990 Historical Dividend Yield April 6th 2020

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. 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 not ideal to see Xinghua Port Holdings's earnings per share have been shrinking at 4.3% a year over the previous three years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Xinghua Port Holdings has delivered 13% dividend growth per year on average over the past two years.

Final Takeaway

Is Xinghua Port Holdings an attractive dividend stock, or better left on the shelf? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. All things considered, we are not particularly enthused about Xinghua Port Holdings from a dividend perspective.

So if you want to do more digging on Xinghua Port Holdings, you'll find it worthwhile knowing the risks that this stock faces. For example, Xinghua Port Holdings has 5 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.