Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Winox Holdings Limited (HKG:6838) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Therefore, if you purchase Winox Holdings' shares on or after the 31st of May, you won't be eligible to receive the dividend, when it is paid on the 23rd of June.

The company's next dividend payment will be HK$0.05 per share, on the back of last year when the company paid a total of HK$0.06 to shareholders. Looking at the last 12 months of distributions, Winox Holdings has a trailing yield of approximately 6.9% on its current stock price of HK$0.87. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Winox Holdings

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. Fortunately Winox Holdings's payout ratio is modest, at just 32% of profit. 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. The good news is it paid out just 9.9% of its free cash flow in the last year.

It's positive to see that Winox 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 Winox Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Winox Holdings's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Winox Holdings has seen its dividend decline 5.7% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

Has Winox Holdings got what it takes to maintain its dividend payments? While it's not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. In summary, while it has some positive characteristics, we're not inclined to race out and buy Winox Holdings today.

While it's tempting to invest in Winox Holdings for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 3 warning signs for Winox Holdings (1 is potentially serious) you should be aware of.

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

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.