Yahoo Finance Why It Might Not Make Sense To Buy Hongkong Land Holdings Limited (SGX:H78) For Its Upcoming Dividend
Hongkong Land Holdings Limited (SGX:H78) stock is about to trade ex-dividend in two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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 Hongkong Land Holdings' shares before the 22nd of August in order to be eligible for the dividend, which will be paid on the 16th of October.
The company's next dividend payment will be US$0.06 per share, and in the last 12 months, the company paid a total of US$0.22 per share. Looking at the last 12 months of distributions, Hongkong Land Holdings has a trailing yield of approximately 6.3% on its current stock price of US$3.47. If you buy this business for its dividend, you should have an idea of whether Hongkong Land Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Hongkong Land Holdings has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Hongkong Land Holdings
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. Hongkong Land Holdings 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. Over the last year it paid out 71% of its free cash flow as dividends, within the usual range for most companies.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. Hongkong Land Holdings 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Hongkong Land Holdings has lifted its dividend by approximately 2.0% a year on average.
Remember, you can always get a snapshot of Hongkong Land Holdings's financial health, by checking our visualisation of its financial health, here.
Final Takeaway
Has Hongkong Land Holdings got what it takes to maintain its dividend payments? 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 the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
So if you're still interested in Hongkong Land Holdings 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 1 warning sign for Hongkong Land Holdings you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
