It Might Not Be A Great Idea To Buy S E A Holdings Limited (HKG:251) For Its Next Dividend

S E A Holdings Limited (HKG:251) is about to trade ex-dividend in the next 4 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase S E A Holdings' shares before the 28th of May in order to receive the dividend, which the company will pay on the 17th of June.

The company's upcoming dividend is HK$0.03 a share, following on from the last 12 months, when the company distributed a total of HK$0.05 per share to shareholders. Based on the last year's worth of payments, S E A Holdings has a trailing yield of 3.7% on the current stock price of HK$1.36. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether S E A Holdings has been able to grow its dividends, or if the dividend might be cut.

We've discovered 3 warning signs about S E A Holdings. View them for free.

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. S E A Holdings's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. The good news is it paid out just 8.0% of its free cash flow in the last year.

See our latest analysis for S E A Holdings

Click here to see how much of its profit S E A 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. S E A Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. S E A Holdings has seen its dividend decline 7.6% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

We update our analysis on S E A Holdings every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Has S E A Holdings got what it takes to maintain its dividend payments? It's hard to get used to S E A Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think S E A Holdings is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with S E A Holdings. Every company has risks, and we've spotted 3 warning signs for S E A Holdings (of which 2 make us uncomfortable!) you should know about.

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.