Tradelink Electronic Commerce's (HKG:536) Dividend Will Be Increased To HK$0.037

Tradelink Electronic Commerce Limited (HKG:536) will increase its dividend from last year's comparable payment on the 6th of October to HK$0.037. This makes the dividend yield 7.1%, which is above the industry average.

View our latest analysis for Tradelink Electronic Commerce

Tradelink Electronic Commerce Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. At the time of the last dividend payment, Tradelink Electronic Commerce was paying out a very large proportion of what it was earning and 97% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, EPS could fall by 0.6% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 114%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was HK$0.094 in 2013, and the most recent fiscal year payment was HK$0.065. This works out to be a decline of approximately 3.6% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Tradelink Electronic Commerce's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Tradelink Electronic Commerce's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Tradelink Electronic Commerce will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Tradelink Electronic Commerce you should be aware of, and 1 of them is a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high yield 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.