Tsim Sha Tsui Properties Limited (HKG:247) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 28th of October to receive the dividend, which will be paid on the 4th of December.
Tsim Sha Tsui Properties's next dividend payment will be HK$0.4 per share, on the back of last year when the company paid a total of HK$0.6 to shareholders. Looking at the last 12 months of distributions, Tsim Sha Tsui Properties has a trailing yield of approximately 2.2% on its current stock price of HK$25.4. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Fortunately Tsim Sha Tsui Properties's payout ratio is modest, at just 27% 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. The good news is it paid out just 0.04% of its free cash flow in the last year.
It's positive to see that Tsim Sha Tsui Properties'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?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Tsim Sha Tsui Properties's 6.4% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tsim Sha Tsui Properties has delivered 3.2% dividend growth per year on average over the past ten years.
Is Tsim Sha Tsui Properties an attractive dividend stock, or better left on the shelf? 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. To summarise, Tsim Sha Tsui Properties looks okay on this analysis, although it doesn't appear a stand-out opportunity.
Want to learn more about Tsim Sha Tsui Properties's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
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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