Don’t buy Golden Resources Development International Limited (HKG: 677) for its next dividend without doing these checks
Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Golden Resources Development International Limited (HKG: 677) is set to be ex-dividend in just 3 days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. In other words, investors can buy the shares of Golden Resources Development International before December 9 in order to be eligible for the dividend, which will be paid on January 10.
The company’s next dividend is HK $ 0.012 per share, following the last 12 months when the company has distributed a total of HK $ 0.024 per share to shareholders. Looking at the last 12 months of distributions, Golden Resources Development International has a rolling return of around 4.6% on its current price of HK $ 0.52. Dividends are an important source of income for many shareholders, but the health of the business is crucial to sustaining these dividends. So we need to determine whether Golden Resources Development International can afford its dividend, and whether the dividend could increase.
See our latest review for Golden Resources Development International
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Golden Resources Development International paid a dividend last year when it was unprofitable. This may be a one-time event, but it is not a long-term sustainable situation. Since the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Golden Resources Development International did not generate enough cash to pay the dividend, then it must have paid either in cash in the bank or by borrowing money, which is not sustainable in the long term. The good news is that she only paid 15% of her free cash flow last year.
Click here to see how much of its profits Golden Resources Development International has paid in the past 12 months.
Have profits and dividends increased?
When profits fall, dividend companies become much more difficult to analyze and safely own. Investors love dividends, so if profits fall and the dividend is reduced, expect a stock to be sold massively at the same time. Golden Resources Development International reported a loss last year, and the general trend suggests that its profits have also declined in recent years, which makes us wonder if the dividend is in jeopardy.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Golden Resources Development International’s dividend payments are broadly unchanged from 10 years ago. When profits go down but dividends are stable, the company usually pays a higher portion of its profits or pays cash or debt on the balance sheet, which is not ideal.
We update our analysis on Golden Resources Development International every 24 hours, so you can always get the latest information on its financial health, here.
Is Golden Resources Development International an attractive dividend-paying stock, or better yet, is it being left out? First, it’s not great to see the company pay a dividend despite having suffered losses in the past year. On the positive side, the dividend was covered by free cash flow. It’s not the most attractive proposition from a dividend standpoint, and we would probably drop this one for now.
So, if you are still interested in Golden Resources Development International despite its low dividend qualities, you should be well informed about some of the risks that this security faces. Note that Golden Resources Development International shows 2 warning signs in our investment analysis, and 1 of them is potentially serious …
However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.