We Wouldn't Be Too Quick To Buy Sino Land Company Limited (HKG:83) Before It Goes Ex-Dividend

Readers hoping to buy Sino Land Company Limited (HKG:83) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. This means that investors who purchase Sino Land's shares on or after the 25th of October will not receive the dividend, which will be paid on the 2nd of December.

The company's upcoming dividend is HK$0.43 a share, following on from the last 12 months, when the company distributed a total of HK$0.58 per share to shareholders. Based on the last year's worth of payments, Sino Land stock has a trailing yield of around 6.7% on the current share price of HK$8.63. If you buy this business for its dividend, you should have an idea of whether Sino Land's dividend is reliable and sustainable. As a result, readers should always check whether Sino Land has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Sino Land

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sino Land distributed an unsustainably high 111% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 88% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's good to see that while Sino Land's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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

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. With that in mind, we're discomforted by Sino Land's 13% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Sino Land has lifted its dividend by approximately 1.5% a year on average.

To Sum It Up

Is Sino Land an attractive dividend stock, or better left on the shelf? Earnings per share have been shrinking in recent times. Additionally, Sino Land is paying out quite a high percentage of its earnings, and more than half its cash flow, so it's hard to evaluate whether the company is reinvesting enough in its business to improve its situation. It's not that we think Sino Land is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Sino Land and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 2 warning signs for Sino Land (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.

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.