Why It Might Not Make Sense To Buy Wharf Real Estate Investment Company Limited (HKG:1997) For Its Upcoming Dividend

By
Simply Wall St
Published
March 19, 2021
SEHK:1997
Source: Shutterstock

It looks like Wharf Real Estate Investment Company Limited (HKG:1997) is about to go ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 24th of March will not receive this dividend, which will be paid on the 22nd of April.

Wharf Real Estate Investment's upcoming dividend is HK$0.69 a share, following on from the last 12 months, when the company distributed a total of HK$1.47 per share to shareholders. Looking at the last 12 months of distributions, Wharf Real Estate Investment has a trailing yield of approximately 3.3% on its current stock price of HK$44.05. If you buy this business for its dividend, you should have an idea of whether Wharf Real Estate Investment'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 Wharf Real Estate Investment

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. Wharf Real Estate Investment reported a loss last year, so it's not great to see that it has continued paying a dividend.

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

historic-dividend
SEHK:1997 Historic Dividend March 19th 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Wharf Real Estate Investment 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. Since the start of our data, three years ago, Wharf Real Estate Investment has lifted its dividend by approximately 16% a year on average.

Remember, you can always get a snapshot of Wharf Real Estate Investment's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Should investors buy Wharf Real Estate Investment for the upcoming dividend? These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that in mind though, if the poor dividend characteristics of Wharf Real Estate Investment don't faze you, it's worth being mindful of the risks involved with this business. Case in point: We've spotted 1 warning sign for Wharf Real Estate Investment you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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