Hong Kong Finance Group Limited (HKG:1273) Looks Interesting, And It's About To Pay A Dividend

Hong Kong Finance Group Limited (HKG:1273) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Hong Kong Finance Group's shares on or after the 9th of September, you won't be eligible to receive the dividend, when it is paid on the 4th of October.

The company's next dividend payment will be HK$0.013 per share, and in the last 12 months, the company paid a total of HK$0.026 per share. Calculating the last year's worth of payments shows that Hong Kong Finance Group has a trailing yield of 8.3% on the current share price of HK$0.315. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Hong Kong Finance Group can afford its dividend, and if the dividend could grow.

See our latest analysis for Hong Kong Finance Group

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. Fortunately Hong Kong Finance Group's payout ratio is modest, at just 25% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Hong Kong Finance Group 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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Hong Kong Finance Group's earnings per share have remained effectively flat 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hong Kong Finance Group has seen its dividend decline 0.7% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Is Hong Kong Finance Group an attractive dividend stock, or better left on the shelf? Earnings per share have been flat in recent years, although Hong Kong Finance Group reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Hong Kong Finance Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

On that note, you'll want to research what risks Hong Kong Finance Group is facing. In terms of investment risks, we've identified 2 warning signs with Hong Kong Finance Group and understanding them should be part of your investment process.

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.