Keck Seng Investments (Hong Kong) Limited (HKG:184) stock is about to trade ex-dividend in 3 days time. You can purchase shares before the 4th of October in order to receive the dividend, which the company will pay on the 25th of October.

Keck Seng Investments (Hong Kong)'s next dividend payment will be HK$0.04 per share. Last year, in total, the company distributed HK$0.2 to shareholders. Calculating the last year's worth of payments shows that Keck Seng Investments (Hong Kong) has a trailing yield of 3.5% on the current share price of HK$4.55. 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! As a result, readers should always check whether Keck Seng Investments (Hong Kong) has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Keck Seng Investments (Hong Kong)

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. Keck Seng Investments (Hong Kong) paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether Keck Seng Investments (Hong Kong) generated enough free cash flow to afford its dividend. It paid out 7.3% of its free cash flow as dividends last year, which is conservatively low.

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 how much of its profit Keck Seng Investments (Hong Kong) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Keck Seng Investments (Hong Kong)'s earnings per share have dropped 11% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Keck Seng Investments (Hong Kong) has seen its dividend decline 0.9% per annum on average over the past ten years, which is not great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid Keck Seng Investments (Hong Kong)? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Keck Seng Investments (Hong Kong) today.

Keen to explore more data on Keck Seng Investments (Hong Kong)'s financial performance? Check out our visualisation of its historical revenue and earnings growth.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

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. Thank you for reading.