It looks like Somerley Capital Holdings Limited (HKG:8439) is about to go ex-dividend in the next 4 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. Meaning, you will need to purchase Somerley Capital Holdings' shares before the 19th of September to receive the dividend, which will be paid on the 29th of September.

The company's next dividend payment will be HK$0.025 per share, on the back of last year when the company paid a total of HK$0.025 to shareholders. Calculating the last year's worth of payments shows that Somerley Capital Holdings has a trailing yield of 2.8% on the current share price of HK$0.88. 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.

View our latest analysis for Somerley Capital 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. Somerley Capital Holdings's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.

Click here to see how much of its profit Somerley Capital Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Somerley Capital 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. Somerley Capital Holdings's dividend payments per share have declined at 6.5% per year on average over the past five 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.

Get our latest analysis on Somerley Capital Holdings's balance sheet health here.

The Bottom Line

Is Somerley Capital Holdings worth buying for its dividend? It's hard to get past the idea of Somerley Capital Holdings paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that being said, if you're still considering Somerley Capital Holdings as an investment, you'll find it beneficial to know what risks this stock is facing. We've identified 2 warning signs with Somerley Capital Holdings (at least 1 which can't be ignored), and understanding them should be part of your investment process.

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.