FSE Lifestyle Services Limited (HKG:331) Will Pay A HK$0.185 Dividend In Four Days

It looks like FSE Lifestyle Services Limited (HKG:331) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase FSE Lifestyle Services' shares before the 26th of November to receive the dividend, which will be paid on the 12th of December.

The company's next dividend payment will be HK$0.185 per share, and in the last 12 months, the company paid a total of HK$0.37 per share. Based on the last year's worth of payments, FSE Lifestyle Services has a trailing yield of 6.3% on the current stock price of HK$5.88. 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.

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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. FSE Lifestyle Services paid out a comfortable 40% of its profit last year. A useful secondary check can be to evaluate whether FSE Lifestyle Services generated enough free cash flow to afford its dividend. Dividends consumed 64% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for FSE Lifestyle Services

Click here to see how much of its profit FSE Lifestyle Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about FSE Lifestyle Services's flat earnings 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. 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, FSE Lifestyle Services has increased its dividend at approximately 14% a year on average.

To Sum It Up

Should investors buy FSE Lifestyle Services for the upcoming dividend? Earnings per share have been flat over the 10-year timeframe we consider, and FSE Lifestyle Services paid out less than half its earnings and more than half its free cashflow over the last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

On that note, you'll want to research what risks FSE Lifestyle Services is facing. Be aware that FSE Lifestyle Services is showing 2 warning signs in our investment analysis, and 1 of those is significant...

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.