Sa Sa International Holdings Limited (HKG:178) is about to trade ex-dividend in the next 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 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, Sa Sa International Holdings investors that purchase the stock on or after the 27th of November will not receive the dividend, which will be paid on the 13th of December.

The company's next dividend payment will be HK$0.0075 per share, on the back of last year when the company paid a total of HK$0.015 to shareholders. Calculating the last year's worth of payments shows that Sa Sa International Holdings has a trailing yield of 2.3% on the current share price of HK$0.65. 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 Sa Sa International Holdings has been able to grow its dividends, or if the dividend might be cut.

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. Sa Sa International Holdings paid out 91% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Sa Sa International Holdings's 21% per annum decline in earnings in 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. Sa Sa International Holdings's dividend payments per share have declined at 24% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Has Sa Sa International Holdings got what it takes to maintain its dividend payments? Earnings per share are in decline and Sa Sa International Holdings is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. Sa Sa International Holdings doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

So if you're still interested in Sa Sa International Holdings despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 1 warning sign for Sa Sa International Holdings that we recommend you consider before investing in the business.

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.