BOC Aviation Limited (HKG:2588) Stock Goes Ex-Dividend In Just Four Days

It looks like BOC Aviation Limited (HKG:2588) is about to go ex-dividend in the next 4 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase BOC Aviation's shares before the 25th of September to receive the dividend, which will be paid on the 12th of October.

The company's next dividend payment will be US$0.11 per share, on the back of last year when the company paid a total of US$0.27 to shareholders. Based on the last year's worth of payments, BOC Aviation has a trailing yield of 3.6% on the current stock price of HK$57.6. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for BOC Aviation

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 BOC Aviation paying out a modest 34% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 69% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that BOC Aviation'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 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that BOC Aviation's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last seven years, BOC Aviation has lifted its dividend by approximately 12% a year on average.

The Bottom Line

Should investors buy BOC Aviation for the upcoming dividend? Earnings per share have been flat over the seven-year timeframe we consider, and BOC Aviation paid out less than half its earnings and more than half its free cashflow over the last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while BOC Aviation has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for BOC Aviation (1 is a bit concerning!) that deserve your attention before investing in the shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.