Should You Buy Zhongmiao Holdings (Qingdao) Co., Ltd. (HKG:1471) For Its Upcoming Dividend?

It looks like Zhongmiao Holdings (Qingdao) Co., Ltd. (HKG:1471) is about to go ex-dividend in the next four days. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Zhongmiao Holdings (Qingdao) investors that purchase the stock on or after the 1st of June will not receive the dividend, which will be paid on the 26th of June.

The company's next dividend payment will be CN¥0.16 per share, on the back of last year when the company paid a total of CN¥0.16 to shareholders. Based on the last year's worth of payments, Zhongmiao Holdings (Qingdao) has a trailing yield of 1.8% on the current stock price of HK$10.52. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Zhongmiao Holdings (Qingdao) paid out a comfortable 44% 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.

Check out our latest analysis for Zhongmiao Holdings (Qingdao)

Click here to see how much of its profit Zhongmiao Holdings (Qingdao) 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Zhongmiao Holdings (Qingdao) earnings per share are up 2.1% per annum over the last five years.

Zhongmiao Holdings (Qingdao) 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.

Given that Zhongmiao Holdings (Qingdao) has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Zhongmiao Holdings (Qingdao) an attractive dividend stock, or better left on the shelf? Zhongmiao Holdings (Qingdao) has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Zhongmiao Holdings (Qingdao) looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Zhongmiao Holdings (Qingdao) and understanding them should be part of your investment process.

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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.