Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Computer And Technologies Holdings Limited (HKG:46) is about to trade ex-dividend in the next three 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 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. Meaning, you will need to purchase Computer And Technologies Holdings' shares before the 1st of September to receive the dividend, which will be paid on the 19th of September.

The company's next dividend payment will be HK$0.065 per share. Last year, in total, the company distributed HK$0.17 to shareholders. Based on the last year's worth of payments, Computer And Technologies Holdings stock has a trailing yield of around 6.8% on the current share price of HK$2.56. 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 Computer And Technologies Holdings has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Computer And Technologies 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. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out more than three-quarters (83%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Computer And Technologies 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 Computer And Technologies Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Computer And Technologies Holdings'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. A high payout ratio of 80% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Computer And Technologies Holdings could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Computer And Technologies Holdings has lifted its dividend by approximately 2.3% a year on average.

To Sum It Up

Is Computer And Technologies Holdings worth buying for its dividend? Computer And Technologies Holdings has struggled to grow its earnings per share, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear unsustainable. Overall, it's hard to get excited about Computer And Technologies Holdings from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Computer And Technologies Holdings, you should know about the other risks facing this business. Every company has risks, and we've spotted 3 warning signs for Computer And Technologies Holdings (of which 1 is concerning!) you should know about.

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.