Only Three Days Left To Cash In On Galaxy Entertainment Group's (HKG:27) Dividend

It looks like Galaxy Entertainment Group Limited (HKG:27) is about to go ex-dividend in the next three 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 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 Galaxy Entertainment Group's shares before the 23rd of May to receive the dividend, which will be paid on the 12th of June.

The company's upcoming dividend is HK$0.50 a share, following on from the last 12 months, when the company distributed a total of HK$1.00 per share to shareholders. Based on the last year's worth of payments, Galaxy Entertainment Group has a trailing yield of 3.1% on the current stock price of HK$32.10. 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 investigate whether Galaxy Entertainment Group can afford its dividend, and if the dividend could grow.

Our free stock report includes 2 warning signs investors should be aware of before investing in Galaxy Entertainment Group. Read for free now.

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 Galaxy Entertainment Group paying out a modest 50% of its earnings. 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. It distributed 33% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Galaxy Entertainment Group'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.

Check out our latest analysis for Galaxy Entertainment Group

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. 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 Galaxy Entertainment Group's 7.8% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Galaxy Entertainment Group has delivered 9.1% dividend growth per year on average over the past 10 years.

The Bottom Line

Should investors buy Galaxy Entertainment Group for the upcoming dividend? Galaxy Entertainment Group 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

In light of that, while Galaxy Entertainment Group has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Galaxy Entertainment Group that we recommend you consider before investing in the business.

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.