We Wouldn't Be Too Quick To Buy Hon Kwok Land Investment Company, Limited (HKG:160) Before It Goes Ex-Dividend

Hon Kwok Land Investment Company, Limited (HKG:160) 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. 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. Accordingly, Hon Kwok Land Investment Company investors that purchase the stock on or after the 5th of September will not receive the dividend, which will be paid on the 4th of October.

The company's next dividend payment will be HK$0.13 per share, and in the last 12 months, the company paid a total of HK$0.13 per share. Last year's total dividend payments show that Hon Kwok Land Investment Company has a trailing yield of 7.1% on the current share price of HK$1.77. If you buy this business for its dividend, you should have an idea of whether Hon Kwok Land Investment Company's dividend is reliable and sustainable. As a result, readers should always check whether Hon Kwok Land Investment Company has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Hon Kwok Land Investment Company

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hon Kwok Land Investment Company paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. 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. It paid out more than half (55%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Hon Kwok Land Investment Company paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Hon Kwok Land Investment Company's earnings per share have plummeted approximately 45% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hon Kwok Land Investment Company's dividend payments are broadly unchanged compared to where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

Final Takeaway

Is Hon Kwok Land Investment Company an attractive dividend stock, or better left on the shelf? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Although, if you're still interested in Hon Kwok Land Investment Company and want to know more, you'll find it very useful to know what risks this stock faces. For example - Hon Kwok Land Investment Company has 1 warning sign we think you should be aware of.

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.