Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Swire Properties Limited (HKG:1972) is about to go ex-dividend in just 4 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Swire Properties' shares before the 7th of September in order to receive the dividend, which the company will pay on the 6th of October.

The company's next dividend payment will be HK$0.32 per share, on the back of last year when the company paid a total of HK$0.95 to shareholders. Based on the last year's worth of payments, Swire Properties has a trailing yield of 5.2% on the current stock price of HK$18.22. If you buy this business for its dividend, you should have an idea of whether Swire Properties's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Swire Properties

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Swire Properties is paying out an acceptable 59% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Swire Properties generated enough free cash flow to afford its dividend. Over the last year, it paid out dividends equivalent to 248% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since Swire Properties is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

Swire Properties paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Swire Properties to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Swire Properties's 8.9% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Swire Properties has delivered 16% dividend growth per year on average over the past 10 years. 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid Swire Properties? Swire Properties had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Swire Properties. For example, we've found 2 warning signs for Swire Properties that we recommend you consider before investing in the business.

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.