Hong Kong Finance Group Limited (HKG:1273) Passed Our Checks, And It's About To Pay A HK$0.013 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hong Kong Finance Group Limited (HKG:1273) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Hong Kong Finance Group's shares before the 8th of September in order to be eligible for the dividend, which will be paid on the 6th of October.

The company's next dividend payment will be HK$0.013 per share, on the back of last year when the company paid a total of HK$0.026 to shareholders. Last year's total dividend payments show that Hong Kong Finance Group has a trailing yield of 6.3% on the current share price of HK$0.41. If you buy this business for its dividend, you should have an idea of whether Hong Kong Finance Group's dividend is reliable and sustainable. As a result, readers should always check whether Hong Kong Finance Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Hong Kong Finance Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hong Kong Finance Group has a low and conservative payout ratio of just 18% of its income after tax.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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?

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. With that in mind, we're encouraged by the steady growth at Hong Kong Finance Group, with earnings per share up 3.3% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hong Kong Finance Group's dividend payments per share have declined at 0.8% per year on average over the past nine years, which is uninspiring.

To Sum It Up

Should investors buy Hong Kong Finance Group for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Hong Kong Finance Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Hong Kong Finance Group has an appealing dividend, it's worth knowing the risks involved with this stock. 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.

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.