The Bank of East Asia, Limited (HKG:23) Will Pay A HK$0.24 Dividend In Three Days

It looks like The Bank of East Asia, Limited (HKG:23) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 11th of March in order to be eligible for this dividend, which will be paid on the 9th of April.

Bank of East Asia's upcoming dividend is HK$0.24 a share, following on from the last 12 months, when the company distributed a total of HK$0.40 per share to shareholders. Calculating the last year's worth of payments shows that Bank of East Asia has a trailing yield of 2.2% on the current share price of HK$17.96. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Bank of East Asia

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 Bank of East Asia's payout ratio is modest, at just 41% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Bank of East Asia's earnings per share have dropped 12% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bank of East Asia's dividend payments per share have declined at 6.2% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Should investors buy Bank of East Asia for the upcoming dividend? Bank of East Asia's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We think there are likely better opportunities out there.

If you're not too concerned about Bank of East Asia's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Bank of East Asia has 1 warning sign we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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