Cathay Real Estate Development Co.,Ltd. (TWSE:2501) Pays A NT$1.00 Dividend In Just Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Cathay Real Estate Development Co.,Ltd. (TWSE:2501) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Cathay Real Estate DevelopmentLtd investors that purchase the stock on or after the 16th of July will not receive the dividend, which will be paid on the 12th of August.

The company's next dividend payment will be NT$1.00 per share. Last year, in total, the company distributed NT$1.00 to shareholders. Based on the last year's worth of payments, Cathay Real Estate DevelopmentLtd has a trailing yield of 3.3% on the current stock price of NT$30.70. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Cathay Real Estate DevelopmentLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Cathay Real Estate DevelopmentLtd paying out a modest 45% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 38% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Cathay Real Estate DevelopmentLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Cathay Real Estate DevelopmentLtd's 6.5% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Cathay Real Estate DevelopmentLtd's dividend payments per share have declined at 3.5% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

From a dividend perspective, should investors buy or avoid Cathay Real Estate DevelopmentLtd? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

While it's tempting to invest in Cathay Real Estate DevelopmentLtd for the dividends alone, you should always be mindful of the risks involved. For example, Cathay Real Estate DevelopmentLtd has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com