Don't Race Out To Buy Analogue Holdings Limited (HKG:1977) Just Because It's Going Ex-Dividend

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 Analogue Holdings Limited (HKG:1977) is about to go ex-dividend in just four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Analogue Holdings investors that purchase the stock on or after the 15th of April will not receive the dividend, which will be paid on the 29th of April.

The company's next dividend payment will be HK$0.01 per share. Last year, in total, the company distributed HK$0.095 to shareholders. Calculating the last year's worth of payments shows that Analogue Holdings has a trailing yield of 9.1% on the current share price of HK$1.05. If you buy this business for its dividend, you should have an idea of whether Analogue Holdings's dividend is reliable and sustainable. So we need to investigate whether Analogue Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Analogue Holdings

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

Click here to see how much of its profit Analogue Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Analogue Holdings's 9.7% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last five years, Analogue Holdings has lifted its dividend by approximately 4.3% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

Final Takeaway

Is Analogue Holdings an attractive dividend stock, or better left on the shelf? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Although, if you're still interested in Analogue Holdings and want to know more, you'll find it very useful to know what risks this stock faces. Every company has risks, and we've spotted 3 warning signs for Analogue Holdings (of which 1 can't be ignored!) you should know about.

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.