Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Maoye International Holdings Limited (HKG:848) is about to go ex-dividend in just 3 days. This means that investors who purchase shares on or after the 27th of May will not receive the dividend, which will be paid on the 16th of June.

Maoye International Holdings's next dividend payment will be HK$0.02 per share, which looks like a nice increase on last year, when the company distributed a total of HK$0.018 to shareholders. If you buy this business for its dividend, you should have an idea of whether Maoye International Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Maoye International Holdings

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. Maoye International Holdings paid out a comfortable 49% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 16% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Maoye International Holdings paid out over the last 12 months.

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. Maoye International Holdings's earnings per share have plummeted approximately 33% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Maoye International Holdings has seen its dividend decline 4.3% per annum on average over the past ten years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

Should investors buy Maoye International Holdings for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, it's hard to get excited about Maoye International Holdings from a dividend perspective.

So while Maoye International Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 6 warning signs for Maoye International Holdings (2 are significant!) that deserve your attention before investing in the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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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. 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. Thank you for reading.