SSY Group Limited (HKG:2005) Will Pay A HK$0.08 Dividend In Three Days

Readers hoping to buy SSY Group Limited (HKG:2005) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Therefore, if you purchase SSY Group's shares on or after the 12th of September, you won't be eligible to receive the dividend, when it is paid on the 27th of September.

The company's upcoming dividend is HK$0.08 a share, following on from the last 12 months, when the company distributed a total of HK$0.18 per share to shareholders. Based on the last year's worth of payments, SSY Group has a trailing yield of 4.7% on the current stock price of HK$3.86. If you buy this business for its dividend, you should have an idea of whether SSY Group's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for SSY 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. SSY Group paid out a comfortable 39% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the past year it paid out 142% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While SSY Group's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were SSY Group to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see SSY Group earnings per share are up 8.6% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SSY Group has delivered 16% dividend growth per year on average over the past 10 years. 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

Is SSY Group an attractive dividend stock, or better left on the shelf? SSY Group delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 142% of its cash flow over the last year, which is a mediocre outcome. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of SSY Group's dividend merits.

With that being said, if dividends aren't your biggest concern with SSY Group, you should know about the other risks facing this business. For example - SSY Group has 1 warning sign we think you should be aware of.

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.