Hong Kong Shanghai Alliance Holdings Limited (HKG:1001) stock is about to trade ex-dividend in four 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. Meaning, you will need to purchase Hong Kong Shanghai Alliance Holdings' shares before the 22nd of August to receive the dividend, which will be paid on the 5th of September.

The company's next dividend payment will be HK$0.015 per share. Last year, in total, the company distributed HK$0.03 to shareholders. Last year's total dividend payments show that Hong Kong Shanghai Alliance Holdings has a trailing yield of 7.8% on the current share price of HK$0.385. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Hong Kong Shanghai Alliance Holdings has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Hong Kong Shanghai Alliance 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. That's why it's good to see Hong Kong Shanghai Alliance Holdings paying out a modest 29% of its earnings. 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. Luckily it paid out just 23% of its free cash flow last year.

It's positive to see that Hong Kong Shanghai Alliance Holdings'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 Hong Kong Shanghai Alliance Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Hong Kong Shanghai Alliance Holdings's 8.4% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hong Kong Shanghai Alliance Holdings has delivered 5.2% dividend growth per year on average over the past 10 years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Hong Kong Shanghai Alliance Holdings? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Hong Kong Shanghai Alliance Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Hong Kong Shanghai Alliance Holdings is facing. For instance, we've identified 3 warning signs for Hong Kong Shanghai Alliance Holdings (1 shouldn't be ignored) you should be aware of.

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.