Is It Smart To Buy Chow Sang Sang Holdings International Limited (HKG:116) Before It Goes Ex-Dividend?

It looks like Chow Sang Sang Holdings International Limited (HKG:116) is about to go ex-dividend in the next four 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. Thus, you can purchase Chow Sang Sang Holdings International's shares before the 9th of September in order to receive the dividend, which the company will pay on the 30th of September.

The company's next dividend payment will be HK$0.21 per share, on the back of last year when the company paid a total of HK$0.51 to shareholders. Calculating the last year's worth of payments shows that Chow Sang Sang Holdings International has a trailing yield of 3.6% on the current share price of HK$14.19. 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! As a result, readers should always check whether Chow Sang Sang Holdings International has been able to grow its dividends, or if the dividend might be cut.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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. Chow Sang Sang Holdings International paid out a comfortable 33% of its profit last year. 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. The good news is it paid out just 24% of its free cash flow in the last year.

It's positive to see that Chow Sang Sang Holdings International'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 Chow Sang Sang Holdings International

Click here to see how much of its profit Chow Sang Sang Holdings International paid out over the last 12 months.

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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Chow Sang Sang Holdings International's earnings per share have been growing at 13% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Chow Sang Sang Holdings International has seen its dividend decline 1.8% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Is Chow Sang Sang Holdings International an attractive dividend stock, or better left on the shelf? Chow Sang Sang Holdings International has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Chow Sang Sang Holdings International, and we would prioritise taking a closer look at it.

While it's tempting to invest in Chow Sang Sang Holdings International for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Chow Sang Sang Holdings International 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.