4 Days Left Until Swire Properties Limited (HKG:1972) Trades Ex-Dividend
It looks like Swire Properties Limited (HKG:1972) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 1st of April will not receive the dividend, which will be paid on the 7th of May.
Swire Properties's next dividend payment will be HK$0.59 per share. Last year, in total, the company distributed HK$0.88 to shareholders. Based on the last year's worth of payments, Swire Properties has a trailing yield of 4.2% on the current stock price of HK$21. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Swire Properties
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. Fortunately Swire Properties's payout ratio is modest, at just 38% of profit. 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. Over the past year it paid out 116% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
While Swire Properties's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its 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?
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Swire Properties, with earnings per share up 7.1% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Swire Properties has delivered 22% dividend growth per year on average over the past eight years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Swire Properties worth buying for its dividend? Swire Properties delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 116% of its cash flow over the last year, which is a mediocre outcome. In summary, it's hard to get excited about Swire Properties from a dividend perspective.
If you want to look further into Swire Properties, it's worth knowing the risks this business faces. Be aware that Swire Properties is showing 5 warning signs in our investment analysis, and 1 of those is concerning...
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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