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Here's Why We're Wary Of Buying Langham Hospitality Investments' (HKG:1270) For Its Upcoming Dividend

Simply Wall St ·  05/13/2022 06:36

Readers hoping to buy Langham Hospitality Investments Limited (HKG:1270) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Langham Hospitality Investments investors that purchase the stock on or after the 17th of May will not receive the dividend, which will be paid on the 7th of June.

The company's next dividend payment will be HK$0.027 per share, on the back of last year when the company paid a total of HK$0.027 to shareholders. Based on the last year's worth of payments, Langham Hospitality Investments stock has a trailing yield of around 2.9% on the current share price of HK$0.92. If you buy this business for its dividend, you should have an idea of whether Langham Hospitality Investments's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Langham Hospitality Investments

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. Langham Hospitality Investments'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 the company's payout ratio, plus analyst estimates of its future dividends.

SEHK:1270 Historic Dividend May 12th 2022

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Langham Hospitality Investments reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

We'd also point out that Langham Hospitality Investments issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Langham Hospitality Investments's dividend payments per share have declined at 21% per year on average over the past eight years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

We update our analysis on Langham Hospitality Investments every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Langham Hospitality Investments? This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Langham Hospitality Investments despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 1 warning sign for Langham Hospitality Investments that we recommend you consider before investing in the business.

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.

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

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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