HK Electric Investments and HK Electric Investments Limited (HKG:2638) Will Pay A HK$0.1609 Dividend In Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HK Electric Investments and HK Electric Investments Limited (HKG:2638) is about to trade ex-dividend in the next 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase HK Electric Investments and HK Electric Investments' shares before the 5th of April in order to be eligible for the dividend, which will be paid on the 17th of April.

The company's next dividend payment will be HK$0.1609 per share, and in the last 12 months, the company paid a total of HK$0.32 per share. Last year's total dividend payments show that HK Electric Investments and HK Electric Investments has a trailing yield of 6.6% on the current share price of HK$4.89. 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 HK Electric Investments and HK Electric Investments

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. Its dividend payout ratio is 90% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about HK Electric Investments and HK Electric Investments's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the HK Electric Investments and HK Electric Investments dividends are largely the same as they were 10 years ago.

The Bottom Line

Is HK Electric Investments and HK Electric Investments worth buying for its dividend? HK Electric Investments and HK Electric Investments has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

If you're not too concerned about HK Electric Investments and HK Electric Investments's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Be aware that HK Electric Investments and HK Electric Investments is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...

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.