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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see A.Plus Group Holdings Limited (HKG:1841) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 22nd of August to receive the dividend, which will be paid on the 19th of September.
A.Plus Group Holdings's next dividend payment will be HK$0.10 per share, which looks like a nice increase on last year, when the company distributed a total of HK$0.025 to shareholders. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether A.Plus Group Holdings has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for A.Plus Group Holdings
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. Fortunately A.Plus Group Holdings's payout ratio is modest, at just 36% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that A.Plus Group 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 A.Plus Group Holdings 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see A.Plus Group Holdings earnings per share are up 9.5% 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.
Unfortunately A.Plus Group Holdings has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.