Do These 3 Checks Before Buying Television Broadcasts Limited (HKG:511) For Its Upcoming Dividend
Readers hoping to buy Television Broadcasts Limited (HKG:511) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 1st of June in order to receive the dividend, which the company will pay on the 16th of June.
Television Broadcasts's next dividend payment will be HK$0.20 per share, on the back of last year when the company paid a total of HK$0.50 to shareholders. Calculating the last year's worth of payments shows that Television Broadcasts has a trailing yield of 5.1% on the current share price of HK$9.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Television Broadcasts
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. Television Broadcasts's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Television Broadcasts didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Television Broadcasts paid out more free cash flow than it generated - 122%, to be precise - last year, which we think is concerningly 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.
Click here to see how much of its profit Television Broadcasts 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. If earnings fall far enough, the company could be forced to cut its dividend. Television Broadcasts was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Television Broadcasts has seen its dividend decline 11% per annum on average over the past ten years, which is not great to see. 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.
We update our analysis on Television Broadcasts every 24 hours, so you can always get the latest insights on its financial health, here.
Final Takeaway
Should investors buy Television Broadcasts for the upcoming dividend? It's hard to get used to Television Broadcasts paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Television Broadcasts.
Although, if you're still interested in Television Broadcasts 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 Television Broadcasts that we recommend you consider before investing in the business.
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.
