Dividend Investors: Don't Be Too Quick To Buy Telecom Service One Holdings Limited (HKG:3997) For Its Upcoming Dividend

It looks like Telecom Service One Holdings Limited (HKG:3997) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Telecom Service One Holdings investors that purchase the stock on or after the 17th of July will not receive the dividend, which will be paid on the 31st of July.

The company's next dividend payment will be HK$0.02 per share, and in the last 12 months, the company paid a total of HK$0.04 per share. Based on the last year's worth of payments, Telecom Service One Holdings has a trailing yield of 6.8% on the current stock price of HK$0.59. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Telecom Service One Holdings has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Telecom Service One Holdings's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.

Check out our latest analysis for Telecom Service One Holdings

Click here to see how much of its profit Telecom Service One Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Telecom Service One Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Telecom Service One Holdings's dividend payments per share have declined at 15% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Get our latest analysis on Telecom Service One Holdings's balance sheet health here.

The Bottom Line

From a dividend perspective, should investors buy or avoid Telecom Service One Holdings? These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

With that in mind though, if the poor dividend characteristics of Telecom Service One Holdings don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 3 warning signs for Telecom Service One Holdings (of which 2 can't be ignored!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.