Be Sure To Check Out Keck Seng Investments (Hong Kong) Limited (HKG:184) Before It Goes Ex-Dividend

It looks like Keck Seng Investments (Hong Kong) Limited (HKG:184) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. 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 9th of October will not receive the dividend, which will be paid on the 29th of October.

The company's next dividend payment will be HK$0.035 per share. Last year, in total, the company distributed HK$0.12 to shareholders. Last year's total dividend payments show that Keck Seng Investments (Hong Kong) has a trailing yield of 5.4% on the current share price of HK$2.30. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Keck Seng Investments (Hong Kong) has a low and conservative payout ratio of just 14% of its income after tax. A useful secondary check can be to evaluate whether Keck Seng Investments (Hong Kong) generated enough free cash flow to afford its dividend. Over the last year it paid out 52% of its free cash flow as dividends, within the usual range for most companies.

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.

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

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 strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Keck Seng Investments (Hong Kong)'s earnings have been skyrocketing, up 60% per annum for 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 1.8% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

Is Keck Seng Investments (Hong Kong) an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Keck Seng Investments (Hong Kong) for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Keck Seng Investments (Hong Kong) you should know about.

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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.