Don't Buy Hysan Development Company Limited (HKG:14) For Its Next Dividend Without Doing These Checks

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hysan Development Company Limited (HKG:14) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 10th of March will not receive the dividend, which will be paid on the 26th of March.

Hysan Development's next dividend payment will be HK$1.17 per share. Last year, in total, the company distributed HK$1.44 to shareholders. Calculating the last year's worth of payments shows that Hysan Development has a trailing yield of 4.4% on the current share price of HK$32.45. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Hysan Development can afford its dividend, and if the dividend could grow.

View our latest analysis for Hysan Development

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. Hysan Development lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Hysan Development 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.

Hysan Development also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Hysan Development has increased its dividend at approximately 7.8% a year on average.

Get our latest analysis on Hysan Development's balance sheet health here.

To Sum It Up

Is Hysan Development an attractive dividend stock, or better left on the shelf? Hysan Development 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.

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 Hysan Development. For example, we've found 1 warning sign for Hysan Development that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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