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 Hong Kong Finance Group Limited (HKG:1273) is about to go ex-dividend in just three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Hong Kong Finance Group's shares on or after the 8th of September, you won't be eligible to receive the dividend, when it is paid on the 6th of October.

The company's next dividend payment will be HK$0.013 per share, and in the last 12 months, the company paid a total of HK$0.026 per share. Looking at the last 12 months of distributions, Hong Kong Finance Group has a trailing yield of approximately 6.3% on its current stock price of HK$0.41. 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 Hong Kong Finance Group has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Hong Kong Finance Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hong Kong Finance Group is paying out just 18% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Hong Kong Finance Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Hong Kong Finance Group earnings per share are up 3.3% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hong Kong Finance Group has seen its dividend decline 0.8% per annum on average over the past nine years, which is not great to see.

The Bottom Line

Is Hong Kong Finance Group worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Hong Kong Finance Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Hong Kong Finance Group has 2 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.