Tian Ge Interactive Holdings (HKG:1980) Will Pay A Dividend Of CN¥0.01

The board of Tian Ge Interactive Holdings Limited (HKG:1980) has announced that it will pay a dividend on the 21st of October, with investors receiving CN¥0.01 per share. This makes the dividend yield 5.9%, which will augment investor returns quite nicely.

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Tian Ge Interactive Holdings' Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Tian Ge Interactive Holdings is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Recent, EPS has fallen by 20.9%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Check out our latest analysis for Tian Ge Interactive Holdings

Tian Ge Interactive Holdings' Dividend Has Lacked Consistency

It's comforting to see that Tian Ge Interactive Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of CN¥0.0499 in 2016 to the most recent total annual payment of CN¥0.0365. Doing the maths, this is a decline of about 3.4% per year. 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.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Tian Ge Interactive Holdings' earnings per share has shrunk at 21% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Tian Ge Interactive Holdings' Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Tian Ge Interactive Holdings make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Tian Ge Interactive Holdings (2 make us uncomfortable!) that you should be aware of before investing. Is Tian Ge Interactive Holdings not quite the opportunity you were looking for? Why not check out 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.