Keck Seng Investments (Hong Kong) Limited (HKG:184) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Keck Seng Investments (Hong Kong)'s shares on or after the 4th of October will not receive the dividend, which will be paid on the 26th of October.

The company's next dividend payment will be HK$0.03 per share. Last year, in total, the company distributed HK$0.06 to shareholders. Looking at the last 12 months of distributions, Keck Seng Investments (Hong Kong) has a trailing yield of approximately 3.0% on its current stock price of HK$2.03. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Keck Seng Investments (Hong Kong)

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Keck Seng Investments (Hong Kong) paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 4.7% of its free cash flow in the last year.

It's positive to see that Keck Seng Investments (Hong Kong)'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 Keck Seng Investments (Hong Kong) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Keck Seng Investments (Hong Kong)'s earnings are down 2.6% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Keck Seng Investments (Hong Kong)'s dividend payments per share have declined at 11% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Has Keck Seng Investments (Hong Kong) got what it takes to maintain its dividend payments? Keck Seng Investments (Hong Kong) has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Keck Seng Investments (Hong Kong) looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Keck Seng Investments (Hong Kong) is facing. For example, we've found 3 warning signs for Keck Seng Investments (Hong Kong) (1 can't be ignored!) that deserve your attention before investing in the shares.

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.