Interested In TCL Electronics Holdings' (HKG:1070) Upcoming HK$0.318 Dividend? You Have Three Days Left

Readers hoping to buy TCL Electronics Holdings Limited (HKG:1070) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. This means that investors who purchase TCL Electronics Holdings' shares on or after the 11th of July will not receive the dividend, which will be paid on the 30th of July.

The company's next dividend payment will be HK$0.318 per share, on the back of last year when the company paid a total of HK$0.32 to shareholders. Looking at the last 12 months of distributions, TCL Electronics Holdings has a trailing yield of approximately 3.3% on its current stock price of HK$9.62. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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 TCL Electronics Holdings's payout ratio is modest, at just 44% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.

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.

View our latest analysis for TCL Electronics Holdings

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see TCL Electronics Holdings's earnings per share have been shrinking at 2.7% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, TCL Electronics Holdings has lifted its dividend by approximately 20% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid TCL Electronics Holdings? 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. In summary, while it has some positive characteristics, we're not inclined to race out and buy TCL Electronics Holdings today.

While it's tempting to invest in TCL Electronics Holdings for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for TCL Electronics Holdings 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.