Just Four Days Till Sino Hotels (Holdings) Limited (HKG:1221) Will Be Trading Ex-Dividend

Sino Hotels (Holdings) Limited (HKG:1221) stock is about to trade ex-dividend in four days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Therefore, if you purchase Sino Hotels (Holdings)'s shares on or after the 11th of March, you won't be eligible to receive the dividend, when it is paid on the 23rd of April.

The company's upcoming dividend is HK$0.015 a share, following on from the last 12 months, when the company distributed a total of HK$0.03 per share to shareholders. Based on the last year's worth of payments, Sino Hotels (Holdings) stock has a trailing yield of around 2.2% on the current share price of HK$1.37. 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! So we need to investigate whether Sino Hotels (Holdings) can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Sino Hotels (Holdings)

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. That's why it's good to see Sino Hotels (Holdings) paying out a modest 44% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 2.7% of its cash flow last year.

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.

Click here to see how much of its profit Sino Hotels (Holdings) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Sino Hotels (Holdings)'s 18% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sino Hotels (Holdings) has seen its dividend decline 9.3% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Sino Hotels (Holdings)? Sino Hotels (Holdings) has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Sino Hotels (Holdings) from a dividend perspective.

In light of that, while Sino Hotels (Holdings) has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Sino Hotels (Holdings) has 1 warning sign we think you should be aware of.

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.