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Why You Should Leave Asiasec Properties Limited's (HKG:271) Upcoming Dividend On The Shelf

Simply Wall St

Asiasec Properties Limited (HKG:271) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 31st of March, you won't be eligible to receive this dividend, when it is paid on the 16th of April.

Asiasec Properties's next dividend payment will be HK$0.025 per share. Last year, in total, the company distributed HK$0.025 to shareholders. Looking at the last 12 months of distributions, Asiasec Properties has a trailing yield of approximately 2.2% on its current stock price of HK$1.16. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Asiasec Properties

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Asiasec Properties paid out 53% of its earnings to investors last year, a normal payout level for most businesses.

Click here to see how much of its profit Asiasec Properties paid out over the last 12 months.

SEHK:271 Historical Dividend Yield March 26th 2020

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. 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 discomforted by Asiasec Properties's 25% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Asiasec Properties has lifted its dividend by approximately 2.8% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

From a dividend perspective, should investors buy or avoid Asiasec Properties? We're not overly enthused to see Asiasec Properties's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. We think there are likely better opportunities out there.

So if you want to do more digging on Asiasec Properties, you'll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we've spotted 1 warning sign for Asiasec Properties you should know about.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.