Be Sure To Check Out Keck Seng Investments (Hong Kong) Limited (HKG:184) Before It Goes Ex-Dividend

Readers hoping to buy Keck Seng Investments (Hong Kong) Limited (HKG:184) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Keck Seng Investments (Hong Kong)'s shares before the 8th of October to receive the dividend, which will be paid on the 30th of October.

The company's next dividend payment will be HK$0.03 per share. Last year, in total, the company distributed HK$0.12 to shareholders. Based on the last year's worth of payments, Keck Seng Investments (Hong Kong) stock has a trailing yield of around 5.0% on the current share price of HK$2.42. 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 Keck Seng Investments (Hong Kong) can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Keck Seng Investments (Hong Kong) is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 44% of the free cash flow it generated, which is a comfortable payout ratio.

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.

View our latest analysis for Keck Seng Investments (Hong Kong)

Click here to see how much of its profit Keck Seng Investments (Hong Kong) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Keck Seng Investments (Hong Kong) has grown its earnings rapidly, up 101% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Keck Seng Investments (Hong Kong) has seen its dividend decline 2.2% per annum on average over the past 10 years, which is not great to see. Keck Seng Investments (Hong Kong) is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Keck Seng Investments (Hong Kong) worth buying for its dividend? Keck Seng Investments (Hong Kong) has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Keck Seng Investments (Hong Kong) for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Keck Seng Investments (Hong Kong) you should be aware of.

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.