We Wouldn't Be Too Quick To Buy Pokfulam Development Company Limited (HKG:225) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Pokfulam Development Company Limited (HKG:225) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 2nd of February in order to receive the dividend, which the company will pay on the 22nd of February.

Pokfulam Development's next dividend payment will be HK$0.34 per share, on the back of last year when the company paid a total of HK$0.38 to shareholders. Looking at the last 12 months of distributions, Pokfulam Development has a trailing yield of approximately 3.2% on its current stock price of HK$11.9. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Pokfulam Development has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Pokfulam Development

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Pokfulam Development reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out more than half (70%) of its free cash flow in the past year, which is within an average range for most companies.

Click here to see how much of its profit Pokfulam Development paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Pokfulam Development 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Pokfulam Development has lifted its dividend by approximately 6.6% a year on average.

We update our analysis on Pokfulam Development every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Is Pokfulam Development worth buying for its dividend? It's hard to get used to Pokfulam Development paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Pokfulam Development has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that in mind though, if the poor dividend characteristics of Pokfulam Development don't faze you, it's worth being mindful of the risks involved with this business. Be aware that Pokfulam Development is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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