Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tian Chang Group Holdings Ltd. (HKG:2182) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 10th of September in order to be eligible for this dividend, which will be paid on the 26th of September.
Tian Chang Group Holdings's next dividend payment will be HK$0.015 per share, and in the last 12 months, the company paid a total of HK$0.03 per share. Based on the last year's worth of payments, Tian Chang Group Holdings stock has a trailing yield of around 4.2% on the current share price of HK$0.72. 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.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Tian Chang Group Holdings has a low and conservative payout ratio of just 17% of its income after tax.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Tian Chang Group Holdings's earnings per share have been growing at 14% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
We'd also point out that Tian Chang Group Holdings issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
This is Tian Chang Group Holdings's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
The Bottom Line
Has Tian Chang Group Holdings got what it takes to maintain its dividend payments? We love that Tian Chang Group Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
Want to learn more about Tian Chang Group Holdings? Here's a visualisation of its historical rate of revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.