It looks like Wharf Real Estate Investment Company Limited (HKG:1997) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 22nd of August will not receive the dividend, which will be paid on the 10th of September.
Wharf Real Estate Investment's next dividend payment will be HK$1.10 per share, and in the last 12 months, the company paid a total of HK$2.20 per share. Looking at the last 12 months of distributions, Wharf Real Estate Investment has a trailing yield of approximately 4.6% on its current stock price of HK$48.2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Wharf Real Estate Investment has been able to grow its dividends, or if the dividend might be cut.
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 Wharf Real Estate Investment's payout ratio is modest, at just 44% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 64% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Wharf Real Estate Investment's earnings per share plummeted 34% over the past year,which is rarely good news for the dividend.
Unfortunately Wharf Real Estate Investment has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
Is Wharf Real Estate Investment an attractive dividend stock, or better left on the shelf? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. In summary, while it has some positive characteristics, we're not inclined to race out and buy Wharf Real Estate Investment today.
Ever wonder what the future holds for Wharf Real Estate Investment? See what the 13 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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