We Wouldn't Be Too Quick To Buy Tai Hing Group Holdings Limited (HKG:6811) Before It Goes Ex-Dividend

Tai Hing Group Holdings Limited (HKG:6811) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Tai Hing Group Holdings' shares on or after the 5th of June will not receive the dividend, which will be paid on the 23rd of June.

The company's upcoming dividend is HK$0.025 a share, following on from the last 12 months, when the company distributed a total of HK$0.05 per share to shareholders. Based on the last year's worth of payments, Tai Hing Group Holdings has a trailing yield of 5.8% on the current stock price of HK$0.86. 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.

View our latest analysis for Tai Hing Group Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Tai Hing Group Holdings lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Tai Hing Group Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 20% of its free cash flow in the last year.

Click here to see how much of its profit Tai Hing Group 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. Tai Hing Group Holdings reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tai Hing Group Holdings has seen its dividend decline 6.3% per annum on average over the past four years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Remember, you can always get a snapshot of Tai Hing Group Holdings's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is Tai Hing Group Holdings an attractive dividend stock, or better left on the shelf? It's hard to get used to Tai Hing Group Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Tai Hing Group Holdings is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Tai Hing Group Holdings despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 1 warning sign for Tai Hing Group 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.