Readers hoping to buy Perfect Medical Health Management Limited (HKG:1830) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Perfect Medical Health Management investors that purchase the stock on or after the 7th of December will not receive the dividend, which will be paid on the 29th of December.

The company's next dividend payment will be HK$0.14 per share, and in the last 12 months, the company paid a total of HK$0.25 per share. Last year's total dividend payments show that Perfect Medical Health Management has a trailing yield of 7.6% on the current share price of HK$3.35. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Perfect Medical Health Management

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Perfect Medical Health Management paid out 97% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 37% of its free cash flow in the past year.

It's good to see that while Perfect Medical Health Management's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Click here to see how much of its profit Perfect Medical Health Management 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. With that in mind, we're encouraged by the steady growth at Perfect Medical Health Management, with earnings per share up 8.0% on average 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. Perfect Medical Health Management has delivered 11% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Is Perfect Medical Health Management worth buying for its dividend? Earnings per share have grown modestly, and last year Perfect Medical Health Management paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. In summary, it's hard to get excited about Perfect Medical Health Management from a dividend perspective.

If you want to look further into Perfect Medical Health Management, it's worth knowing the risks this business faces. Case in point: We've spotted 1 warning sign for Perfect Medical Health Management you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.