Swire Properties Limited (HKG:1972) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Swire Properties investors that purchase the stock on or after the 4th of September will not receive the dividend, which will be paid on the 9th of October.

The company's next dividend payment will be HK$0.34 per share, and in the last 12 months, the company paid a total of HK$1.06 per share. Calculating the last year's worth of payments shows that Swire Properties has a trailing yield of 7.4% on the current share price of HK$14.38. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Swire Properties can afford its dividend, and if the dividend could grow.

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. An unusually high payout ratio of 281% of its profit suggests something is happening other than the usual distribution of profits to shareholders. A useful secondary check can be to evaluate whether Swire Properties generated enough free cash flow to afford its dividend. Over the past year it paid out 144% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Cash is slightly more important than profit from a dividend perspective, but given Swire Properties's payments were not well covered by either earnings or cash flow, we are concerned about the sustainability of this dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Swire Properties's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 40% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Swire Properties has lifted its dividend by approximately 5.9% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Swire Properties is already paying out 281% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

To Sum It Up

Is Swire Properties an attractive dividend stock, or better left on the shelf? It's looking like an unattractive opportunity, with its earnings per share declining, while, paying out an uncomfortably high percentage of both its profits (281%) and cash flow as dividends. This is a clearly suboptimal combination that usually suggests the dividend is at risk of being cut. If not now, then perhaps in the future. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Although, if you're still interested in Swire Properties and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 4 warning signs for Swire Properties (1 is a bit unpleasant!) that deserve your attention before investing in the shares.

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.