Is It Worth Considering Great Eagle Holdings Limited (HKG:41) For Its Upcoming Dividend?

It looks like Great Eagle Holdings Limited (HKG:41) is about to go ex-dividend in the next four days. The ex-dividend date is one business day 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 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. Therefore, if you purchase Great Eagle Holdings' shares on or after the 24th of September, you won't be eligible to receive the dividend, when it is paid on the 15th of October.

The company's upcoming dividend is HK$0.37 a share, following on from the last 12 months, when the company distributed a total of HK$0.87 per share to shareholders. Calculating the last year's worth of payments shows that Great Eagle Holdings has a trailing yield of 7.4% on the current share price of HK$11.68. If you buy this business for its dividend, you should have an idea of whether Great Eagle Holdings'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 Great Eagle 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. Great Eagle Holdings reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Great Eagle Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.

Click here to see how much of its profit Great Eagle Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Great Eagle Holdings was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Great Eagle Holdings has lifted its dividend by approximately 2.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Remember, you can always get a snapshot of Great Eagle Holdings's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Should investors buy Great Eagle Holdings for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." In summary, while it has some positive characteristics, we're not inclined to race out and buy Great Eagle Holdings today.

So while Great Eagle Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 2 warning signs we've spotted with Great Eagle Holdings (including 1 which makes us a bit uncomfortable).

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.