Don't Race Out To Buy Gold Peak Technology Group Limited (HKG:40) Just Because It's Going Ex-Dividend

Gold Peak Technology Group Limited (HKG:40) stock is about to trade ex-dividend in 4 days. 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Gold Peak Technology Group's shares on or after the 23rd of December will not receive the dividend, which will be paid on the 8th of January.

The company's upcoming dividend is HK$0.015 a share, following on from the last 12 months, when the company distributed a total of HK$0.03 per share to shareholders. Calculating the last year's worth of payments shows that Gold Peak Technology Group has a trailing yield of 5.9% on the current share price of HK$0.51. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Gold Peak Technology Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Gold Peak Technology Group reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. 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. Luckily it paid out just 4.1% of its free cash flow last year.

Click here to see how much of its profit Gold Peak Technology Group 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. Gold Peak Technology Group 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Gold Peak Technology Group has seen its dividend decline 2.8% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

We update our analysis on Gold Peak Technology Group every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Gold Peak Technology Group? 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." It's not that we think Gold Peak Technology Group is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Gold Peak Technology Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 4 warning signs for Gold Peak Technology Group (of which 2 are potentially serious!) you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.