Dickson Concepts (International) Limited (HKG:113) stock is about to trade ex-dividend in 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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 Dickson Concepts (International)'s shares before the 11th of August in order to be eligible for the dividend, which will be paid on the 23rd of August.

The company's next dividend payment will be HK$0.27 per share. Last year, in total, the company distributed HK$0.35 to shareholders. Last year's total dividend payments show that Dickson Concepts (International) has a trailing yield of 8.7% on the current share price of HK$4. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Dickson Concepts (International)

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. Dickson Concepts (International) is paying out an acceptable 69% of its profit, a common payout level among most companies. 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. It paid out 19% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Dickson Concepts (International)'s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Dickson Concepts (International) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Dickson Concepts (International)'s earnings per share have been growing at 19% a year for the past five years. Dickson Concepts (International) is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Dickson Concepts (International) has delivered an average of 0.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Should investors buy Dickson Concepts (International) for the upcoming dividend? We like Dickson Concepts (International)'s growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Dickson Concepts (International) looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Dickson Concepts (International) looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Dickson Concepts (International) 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.