Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Financial Street Property Co., Limited (HKG:1502) is about to trade ex-dividend in the next four 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 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 Financial Street Property's shares before the 13th of June in order to be eligible for the dividend, which will be paid on the 8th of August.

The company's upcoming dividend is CN¥0.22 a share, following on from the last 12 months, when the company distributed a total of CN¥0.22 per share to shareholders. Based on the last year's worth of payments, Financial Street Property stock has a trailing yield of around 8.7% on the current share price of HK$3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Financial Street Property has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Financial Street Property

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Financial Street Property paid out 60% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (60%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Financial Street Property'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 Financial Street Property paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Financial Street Property's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

We'd also point out that Financial Street Property 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.

Unfortunately Financial Street Property has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Has Financial Street Property got what it takes to maintain its dividend payments? While earnings per share are flat, at least Financial Street Property has not committed itself to an unsustainable dividend, with its earnings and cashflow payout ratios within reasonable bounds. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that in mind though, if the poor dividend characteristics of Financial Street Property don't faze you, it's worth being mindful of the risks involved with this business. Our analysis shows 1 warning sign for Financial Street Property and you should be aware of it before buying any shares.

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.