Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tse Sui Luen Jewellery (International) Limited (HKG:417) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 16th of September will not receive this dividend, which will be paid on the 17th of October.
Tse Sui Luen Jewellery (International)'s next dividend payment will be HK$0.056 per share. Last year, in total, the company distributed HK$0.10 to shareholders. Based on the last year's worth of payments, Tse Sui Luen Jewellery (International) stock has a trailing yield of around 6.1% on the current share price of HK$1.71. If you buy this business for its dividend, you should have an idea of whether Tse Sui Luen Jewellery (International)'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.
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. That's why it's good to see Tse Sui Luen Jewellery (International) paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether Tse Sui Luen Jewellery (International) generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.
It's positive to see that Tse Sui Luen Jewellery (International)'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.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Tse Sui Luen Jewellery (International)'s 6.4% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tse Sui Luen Jewellery (International) has delivered 9.3% dividend growth per year on average over the past 10 years.
To Sum It Up
From a dividend perspective, should investors buy or avoid Tse Sui Luen Jewellery (International)? Earnings per share are down meaningfully, 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 needs to be cut. Overall, it's hard to get excited about Tse Sui Luen Jewellery (International) from a dividend perspective.
Want to learn more about Tse Sui Luen Jewellery (International)? Here's a visualisation of its historical rate of revenue and earnings growth.
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.
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