Time Watch Investments Limited (HKG:2033) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 26th of November will not receive this dividend, which will be paid on the 9th of December.
Time Watch Investments's next dividend payment will be HK$0.043 per share, on the back of last year when the company paid a total of HK$0.063 to shareholders. Based on the last year's worth of payments, Time Watch Investments has a trailing yield of 6.4% on the current stock price of HK$0.99. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Time Watch Investments has been able to grow its dividends, or if the dividend might be cut.
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. Fortunately Time Watch Investments's payout ratio is modest, at just 43% of profit. 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. Thankfully its dividend payments took up just 40% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. That explains why we're not overly excited about Time Watch Investments's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past six years, Time Watch Investments has increased its dividend at approximately 13% a year on average.
Should investors buy Time Watch Investments for the upcoming dividend? Earnings per share have been flat, 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 gets cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Time Watch Investments today.
Curious about whether Time Watch Investments has been able to consistently generate growth? Here's a chart of its historical 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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. Thank you for reading.