Explore Oriental Enterprise Holdings's Fair Values from the Community and select yours

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Oriental Enterprise Holdings Limited (HKG:18) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be two business days 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. This means that investors who purchase Oriental Enterprise Holdings' shares on or after the 26th of August will not receive the dividend, which will be paid on the 10th of September.

The company's next dividend payment will be HK$0.01 per share, and in the last 12 months, the company paid a total of HK$0.02 per share. Looking at the last 12 months of distributions, Oriental Enterprise Holdings has a trailing yield of approximately 5.5% on its current stock price of HK$0.365. If you buy this business for its dividend, you should have an idea of whether Oriental Enterprise 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.

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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. Last year Oriental Enterprise Holdings paid out 91% 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. It paid out 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's good to see that while Oriental Enterprise Holdings'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.

See our latest analysis for Oriental Enterprise Holdings

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Oriental Enterprise Holdings's earnings are down 3.9% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Oriental Enterprise Holdings has seen its dividend decline 8.8% per annum on average over the past 10 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

Is Oriental Enterprise Holdings an attractive dividend stock, or better left on the shelf? It's never fun to see a company's earnings per share in retreat. Additionally, Oriental Enterprise Holdings is paying out quite a high percentage of its earnings, and more than half its cash flow, so it's hard to evaluate whether the company is reinvesting enough in its business to improve its situation. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Oriental Enterprise Holdings.

Although, if you're still interested in Oriental Enterprise Holdings and want to know more, you'll find it very useful to know what risks this stock faces. For example, we've found 1 warning sign for Oriental Enterprise Holdings that we recommend you consider before investing in the business.

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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.