Chinney Alliance Group Limited (HKG:385) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Chinney Alliance Group's shares before the 7th of June in order to receive the dividend, which the company will pay on the 5th of July.

The company's upcoming dividend is HK$0.025 a share, following on from the last 12 months, when the company distributed a total of HK$0.025 per share to shareholders. Calculating the last year's worth of payments shows that Chinney Alliance Group has a trailing yield of 5.0% on the current share price of HK$0.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Chinney Alliance Group has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Chinney Alliance Group

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. Chinney Alliance Group reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 11% of its free cash flow as dividends last year, which is conservatively low.

Click here to see how much of its profit Chinney Alliance Group paid out over the last 12 months.

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. Chinney Alliance Group reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Chinney Alliance Group has seen its dividend decline 1.8% per annum on average over the past 10 years, which is not great to see.

We update our analysis on Chinney Alliance Group every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Should investors buy Chinney Alliance Group for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Bottom line: Chinney Alliance Group has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in Chinney Alliance Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, Chinney Alliance Group has 3 warning signs (and 1 which can't be ignored) we think you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.