Have you been keeping an eye on The Bank of East Asia Limited’s (HKG:23) upcoming dividend of HK$0.51 per share payable on the 12 October 2018? Then you only have 4 days left before the stock starts trading ex-dividend on the 13 September 2018. Is this future income a persuasive enough catalyst for investors to think about Bank of East Asia as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.

Check out our latest analysis for Bank of East Asia

Here’s how I find good dividend stocks

If you are a dividend investor, you should always assess these five key metrics:

• Does it pay an annual yield higher than 75% of dividend payers?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share risen in the past couple of years?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it be able to continue to payout at the current rate in the future?

How does Bank of East Asia fare?

The company currently pays out 47.9% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 23’s payout to remain around the same level at 45.5% of its earnings, which leads to a dividend yield of around 3.7%. In addition to this, EPS should increase to HK$2.34.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Dividend payments from Bank of East Asia have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.

Compared to its peers, Bank of East Asia produces a yield of 4.4%, which is on the low-side for Banks stocks.

Next Steps:

Taking all the above into account, Bank of East Asia is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key aspects you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for 23’s future growth? Take a look at our free research report of analyst consensus for 23’s outlook.

2. Valuation: What is 23 worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 23 is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.