It looks like Sun Hung Kai Properties Limited (HKG:16) is about to go ex-dividend in the next four days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Sun Hung Kai Properties' shares on or after the 12th of March, you won't be eligible to receive the dividend, when it is paid on the 20th of March.

The company's next dividend payment will be HK$0.95 per share, on the back of last year when the company paid a total of HK$3.75 to shareholders. Looking at the last 12 months of distributions, Sun Hung Kai Properties has a trailing yield of approximately 4.9% on its current stock price of HK$76.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Sun Hung Kai Properties

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sun Hung Kai Properties paid out 62% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Sun Hung Kai Properties generated enough free cash flow to afford its dividend. Dividends consumed 68% 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Sun Hung Kai Properties's earnings per share have fallen at approximately 17% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Sun Hung Kai Properties has lifted its dividend by approximately 1.1% a year on average.

The Bottom Line

From a dividend perspective, should investors buy or avoid Sun Hung Kai Properties? While earnings per share are shrinking, it's encouraging to see that at least Sun Hung Kai Properties's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Sun Hung Kai Properties.

With that in mind though, if the poor dividend characteristics of Sun Hung Kai Properties don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 2 warning signs for Sun Hung Kai Properties that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.