Here's What We Like About EuroEyes International Eye Clinic's (HKG:1846) Upcoming Dividend

Readers hoping to buy EuroEyes International Eye Clinic Limited (HKG:1846) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase EuroEyes International Eye Clinic's shares before the 26th of September in order to receive the dividend, which the company will pay on the 17th of October.

The company's next dividend payment will be HK$0.0315 per share, on the back of last year when the company paid a total of HK$0.059 to shareholders. Based on the last year's worth of payments, EuroEyes International Eye Clinic stock has a trailing yield of around 1.8% on the current share price of HK$3.25. If you buy this business for its dividend, you should have an idea of whether EuroEyes International Eye Clinic's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. That's why it's good to see EuroEyes International Eye Clinic paying out a modest 26% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.

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.

Check out our latest analysis for EuroEyes International Eye Clinic

Click here to see how much of its profit EuroEyes International Eye Clinic paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at EuroEyes International Eye Clinic, with earnings per share up 6.0% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. EuroEyes International Eye Clinic has delivered an average of 19% per year annual increase in its dividend, based on the past four years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy EuroEyes International Eye Clinic for the upcoming dividend? Earnings per share have been growing moderately, and EuroEyes International Eye Clinic is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and EuroEyes International Eye Clinic is halfway there. EuroEyes International Eye Clinic looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in EuroEyes International Eye Clinic for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for EuroEyes International Eye Clinic you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.