Tsim Sha Tsui Properties (HKG:247) Is Due To Pay A Dividend Of HK$0.43

The board of Tsim Sha Tsui Properties Limited (HKG:247) has announced that it will pay a dividend of HK$0.43 per share on the 3rd of December. Including this payment, the dividend yield on the stock will be 3.3%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Tsim Sha Tsui Properties

Tsim Sha Tsui Properties' Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Tsim Sha Tsui Properties was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 10.2% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 56%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Tsim Sha Tsui Properties Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was HK$0.50, compared to the most recent full-year payment of HK$0.58. This implies that the company grew its distributions at a yearly rate of about 1.5% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Tsim Sha Tsui Properties' EPS has declined at around 10% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tsim Sha Tsui Properties' payments, as there could be some issues with sustaining them into the future. While Tsim Sha Tsui Properties is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Tsim Sha Tsui Properties that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.