Mao Geping Cosmetics Co., Ltd. (HKG:1318) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Mao Geping Cosmetics Co., Ltd. (HKG:1318) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Meaning, you will need to purchase Mao Geping Cosmetics' shares before the 28th of April to receive the dividend, which will be paid on the 26th of May.

The company's next dividend payment will be CN¥1.00 per share, and in the last 12 months, the company paid a total of CN¥1.00 per share. Calculating the last year's worth of payments shows that Mao Geping Cosmetics has a trailing yield of 1.5% on the current share price of HK$74.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Mao Geping Cosmetics can afford its dividend, and if the dividend could grow.

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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. Mao Geping Cosmetics paid out a comfortable 41% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

See our latest analysis for Mao Geping Cosmetics

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Mao Geping Cosmetics earnings per share are up 8.2% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. 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.

Given that Mao Geping Cosmetics has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Is Mao Geping Cosmetics worth buying for its dividend? Earnings per share growth has been growing somewhat, and Mao Geping Cosmetics is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. 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 Mao Geping Cosmetics is halfway there. There's a lot to like about Mao Geping Cosmetics, and we would prioritise taking a closer look at it.

Ever wonder what the future holds for Mao Geping Cosmetics? See what the 17 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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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.