Sun Hung Kai & Co. Limited (HKG:86) stock is about to trade ex-dividend in 3 days time. You can purchase shares before the 23rd of April in order to receive the dividend, which the company will pay on the 13th of May.

Sun Hung Kai's next dividend payment will be HK$0.14 per share, and in the last 12 months, the company paid a total of HK$0.26 per share. Based on the last year's worth of payments, Sun Hung Kai stock has a trailing yield of around 7.9% on the current share price of HK$3.3. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Sun Hung Kai

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Sun Hung Kai is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Sun Hung Kai paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Sun Hung Kai's earnings per share have risen 19% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, ten years ago, Sun Hung Kai has lifted its dividend by approximately 10% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has Sun Hung Kai got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Sun Hung Kai looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Sun Hung Kai for the dividends alone, you should always be mindful of the risks involved. For example, we've found 3 warning signs for Sun Hung Kai (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.

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.

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.