Income Investors Should Know That Hang Lung Group Limited (HKG:10) Goes Ex-Dividend Soon
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hang Lung Group Limited (HKG:10) is about to go ex-dividend in just 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a 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. In other words, investors can purchase Hang Lung Group's shares before the 12th of August in order to be eligible for the dividend, which will be paid on the 25th of September.
The company's next dividend payment will be HK$0.21 per share, on the back of last year when the company paid a total of HK$0.86 to shareholders. Based on the last year's worth of payments, Hang Lung Group has a trailing yield of 6.5% on the current stock price of HK$13.24. 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.
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. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 20% of its free cash flow in the last 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.
View our latest analysis for Hang Lung Group
Click here to see how much of its profit Hang Lung Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Hang Lung Group's earnings per share have fallen at approximately 12% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hang Lung Group has delivered 0.7% dividend growth per year on average over the past 10 years.
The Bottom Line
Should investors buy Hang Lung Group for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. All things considered, we are not particularly enthused about Hang Lung Group from a dividend perspective.
However if you're still interested in Hang Lung Group as a potential investment, you should definitely consider some of the risks involved with Hang Lung Group. Every company has risks, and we've spotted 2 warning signs for Hang Lung Group (of which 1 is significant!) 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.