Precision Tsugami (China) Corporation Limited (HKG:1651)'s Could Be A Buy For Its Upcoming Dividend
Precision Tsugami (China) Corporation Limited (HKG:1651) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 22nd of August in order to be eligible for this dividend, which will be paid on the 4th of September.
Precision Tsugami (China)'s next dividend payment will be CN¥0.15 per share, and in the last 12 months, the company paid a total of CN¥0.26 per share. Calculating the last year's worth of payments shows that Precision Tsugami (China) has a trailing yield of 3.9% on the current share price of HK$7.46. 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 investigate whether Precision Tsugami (China) can afford its dividend, and if the dividend could grow.
View our latest analysis for Precision Tsugami (China)
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. Precision Tsugami (China) paid out a comfortable 31% 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. Dividends consumed 59% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Precision Tsugami (China)'s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For that reason, it's encouraging to see Precision Tsugami (China)'s earnings over the past year have risen 0.68222. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.
One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.
Given that Precision Tsugami (China) has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Should investors buy Precision Tsugami (China) for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
Curious what other investors think of Precision Tsugami (China)? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
If you're in the market for dividend stocks, we recommend checking our list of top 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 editorial-team@simplywallst.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.
