June 22, 2024

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Should You Buy Hamaton Automotive Technology Co., Ltd (SZSE:300643) For Its Upcoming Dividend?

4 min read

Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Hamaton Automotive Technology Co., Ltd (SZSE:300643) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. 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. Meaning, you will need to purchase Hamaton Automotive Technology’s shares before the 30th of May to receive the dividend, which will be paid on the 30th of May.

The company’s next dividend payment will be CN¥0.16 per share. Last year, in total, the company distributed CN¥0.16 to shareholders. Calculating the last year’s worth of payments shows that Hamaton Automotive Technology has a trailing yield of 1.5% on the current share price of CN¥10.86. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Hamaton Automotive Technology can afford its dividend, and if the dividend could grow.

See our latest analysis for Hamaton Automotive Technology

If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. That’s why it’s good to see Hamaton Automotive Technology paying out a modest 28% of its earnings. A useful secondary check can be to evaluate whether Hamaton Automotive Technology generated enough free cash flow to afford its dividend. The good news is it paid out just 22% of its free cash flow in the last year.

It’s positive to see that Hamaton Automotive Technology’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 Hamaton Automotive Technology paid out over the last 12 months.

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SZSE:300643 Historic Dividend May 26th 2024

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That’s why it’s comforting to see Hamaton Automotive Technology’s earnings have been skyrocketing, up 29% per annum for the past five years. Hamaton Automotive Technology is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Hamaton Automotive Technology has delivered 6.4% dividend growth per year on average over the past six years. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Hamaton Automotive Technology? It’s great that Hamaton Automotive Technology is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It’s disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It’s a promising combination that should mark this company worthy of closer attention.

On that note, you’ll want to research what risks Hamaton Automotive Technology is facing. For example, we’ve found 1 warning sign for Hamaton Automotive Technology that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Valuation is complex, but we’re helping make it simple.

Find out whether Hamaton Automotive Technology is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.

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