Just Four Days Till Hong Kong Exchanges and Clearing Limited (HKG:388) Will Be Trading Ex-Dividend

Hong Kong Exchanges and Clearing Limited (HKG:388) stock is about to trade ex-dividend in 4 days. This means that investors who purchase shares on or after the 9th of March will not receive the dividend, which will be paid on the 23rd of March.

Hong Kong Exchanges and Clearing's next dividend payment will be HK$4.46 per share. Last year, in total, the company distributed HK$8.17 to shareholders. Based on the last year's worth of payments, Hong Kong Exchanges and Clearing stock has a trailing yield of around 1.7% on the current share price of HK$483. 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 Exchanges and Clearing can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hong Kong Exchanges and Clearing

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 90% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Hong Kong Exchanges and Clearing earnings per share are up 6.3% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Hong Kong Exchanges and Clearing has lifted its dividend by approximately 6.9% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has Hong Kong Exchanges and Clearing got what it takes to maintain its dividend payments? Hong Kong Exchanges and Clearing has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.

Curious what other investors think of Hong Kong Exchanges and Clearing? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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