Hanison Construction Holdings Limited (HKG:896) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. In other words, investors can purchase Hanison Construction Holdings' shares before the 28th of June in order to be eligible for the dividend, which will be paid on the 15th of July.

The company's upcoming dividend is HK$0.05 a share, following on from the last 12 months, when the company distributed a total of HK$0.075 per share to shareholders. Last year's total dividend payments show that Hanison Construction Holdings has a trailing yield of 6.4% on the current share price of HK$1.17. If you buy this business for its dividend, you should have an idea of whether Hanison Construction Holdings's dividend is reliable and sustainable. As a result, readers should always check whether Hanison Construction Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Hanison Construction Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hanison Construction Holdings paid out more than half (54%) of its earnings last year, which is a regular payout ratio for most companies. Hanison Construction Holdings paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Hanison Construction Holdings's earnings per share have dropped 23% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hanison Construction Holdings has delivered an average of 9.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

Is Hanison Construction Holdings worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

If you want to look further into Hanison Construction Holdings, it's worth knowing the risks this business faces. Our analysis shows 4 warning signs for Hanison Construction Holdings that we strongly recommend you have a look at before investing in the company.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.