Here's Why We're Wary Of Buying BOC Hong Kong (Holdings)'s (HKG:2388) For Its Upcoming Dividend

BOC Hong Kong (Holdings) Limited (HKG:2388) is about to trade ex-dividend in the next four 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. 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. Thus, you can purchase BOC Hong Kong (Holdings)'s shares before the 3rd of July in order to receive the dividend, which the company will pay on the 14th of July.

The company's next dividend payment will be HK$0.91 per share, and in the last 12 months, the company paid a total of HK$1.36 per share. Based on the last year's worth of payments, BOC Hong Kong (Holdings) has a trailing yield of 5.6% on the current stock price of HK$24.2. 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! As a result, readers should always check whether BOC Hong Kong (Holdings) has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for BOC Hong Kong (Holdings)

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. BOC Hong Kong (Holdings) paid out 53% of its earnings to investors last year, a normal payout level for most businesses.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that BOC Hong Kong (Holdings)'s earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. BOC Hong Kong (Holdings) has delivered 2.1% dividend growth per year on average over the past 10 years.

The Bottom Line

Is BOC Hong Kong (Holdings) worth buying for its dividend? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you're still considering BOC Hong Kong (Holdings) as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 1 warning sign for BOC Hong Kong (Holdings) and you should be aware of this before buying any shares.

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

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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.