Why It Might Not Make Sense To Buy The Wharf (Holdings) Limited (HKG:4) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that The Wharf (Holdings) Limited (HKG:4) is about to go ex-dividend in just 2 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Wharf (Holdings)'s shares on or after the 3rd of April, you won't be eligible to receive the dividend, when it is paid on the 24th of April.

The company's next dividend payment will be HK$0.20 per share. Last year, in total, the company distributed HK$0.40 to shareholders. Based on the last year's worth of payments, Wharf (Holdings) stock has a trailing yield of around 2.2% on the current share price of HK$18.48. If you buy this business for its dividend, you should have an idea of whether Wharf (Holdings)'s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wharf (Holdings) reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.

See our latest analysis for Wharf (Holdings)

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Wharf (Holdings) reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wharf (Holdings) has seen its dividend decline 13% 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.

Get our latest analysis on Wharf (Holdings)'s balance sheet health here.

To Sum It Up

From a dividend perspective, should investors buy or avoid Wharf (Holdings)? Wharf (Holdings) doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Curious what other investors think of Wharf (Holdings)? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.