Should Income Investors Look At Tsim Sha Tsui Properties Limited (HKG:247) Before Its Ex-Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Tsim Sha Tsui Properties Limited (HKG:247) is about to go ex-dividend in just 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Tsim Sha Tsui Properties' shares before the 25th of October in order to be eligible for the dividend, which will be paid on the 3rd of December.

The company's upcoming dividend is HK$0.43 a share, following on from the last 12 months, when the company distributed a total of HK$0.58 per share to shareholders. Based on the last year's worth of payments, Tsim Sha Tsui Properties has a trailing yield of 3.1% on the current stock price of HK$18.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Tsim Sha Tsui Properties can afford its dividend, and if the dividend could grow.

See our latest analysis for Tsim Sha Tsui Properties

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Tsim Sha Tsui Properties paying out a modest 48% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 0.5% of its free cash flow as dividends last year, which is conservatively low.

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.

Click here to see how much of its profit Tsim Sha Tsui Properties paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Tsim Sha Tsui Properties's 10% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Tsim Sha Tsui Properties has lifted its dividend by approximately 1.5% a year on average.

The Bottom Line

Should investors buy Tsim Sha Tsui Properties for the upcoming dividend? Tsim Sha Tsui Properties has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Tsim Sha Tsui Properties from a dividend perspective.

In light of that, while Tsim Sha Tsui Properties has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Tsim Sha Tsui Properties and you should be aware of this before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.