Four Days Left To Buy Pico Far East Holdings Limited (HKG:752) Before The Ex-Dividend Date

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Pico Far East Holdings Limited (HKG:752) is about to trade ex-dividend in the next four 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Pico Far East Holdings' shares before the 20th of March in order to be eligible for the dividend, which will be paid on the 10th of April.

The company's next dividend payment will be HK$0.07 per share, on the back of last year when the company paid a total of HK$0.09 to shareholders. Looking at the last 12 months of distributions, Pico Far East Holdings has a trailing yield of approximately 5.3% on its current stock price of HK$1.71. If you buy this business for its dividend, you should have an idea of whether Pico Far East Holdings's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Pico Far East Holdings

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. Pico Far East Holdings paid out a comfortable 49% of its profit last year. A useful secondary check can be to evaluate whether Pico Far East Holdings generated enough free cash flow to afford its dividend. The good news is it paid out just 24% of its free cash flow in the last year.

It's positive to see that Pico Far East Holdings'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.

Click here to see how much of its profit Pico Far East Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Pico Far East Holdings's earnings are down 3.5% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Pico Far East Holdings has seen its dividend decline 1.0% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Should investors buy Pico Far East Holdings for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Pico Far East Holdings today.

While it's tempting to invest in Pico Far East Holdings for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Pico Far East Holdings that we strongly recommend you have a look at before investing in the company.

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.