Don't Buy Tai Sang Land Development Limited (HKG:89) For Its Next Dividend Without Doing These Checks

Tai Sang Land Development Limited (HKG:89) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase Tai Sang Land Development's shares before the 28th of May in order to receive the dividend, which the company will pay on the 18th of June.

The company's next dividend payment will be HK$0.06 per share. Last year, in total, the company distributed HK$0.12 to shareholders. Looking at the last 12 months of distributions, Tai Sang Land Development has a trailing yield of approximately 5.2% on its current stock price of HK$2.31. 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 check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Tai Sang Land Development

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Tai Sang Land Development's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. 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 Sang Land Development 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. Luckily it paid out just 21% of its free cash flow last year.

Click here to see how much of its profit Tai Sang Land Development paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Tai Sang Land Development 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tai Sang Land Development has delivered an average of 0.9% per year annual increase in its dividend, based on the past 10 years of dividend payments.

We update our analysis on Tai Sang Land Development every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Has Tai Sang Land Development got what it takes to maintain its dividend payments? It's hard to get used to Tai Sang Land Development paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Tai Sang Land Development.

So if you're still interested in Tai Sang Land Development despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For instance, we've identified 3 warning signs for Tai Sang Land Development (1 is a bit unpleasant) you should be aware of.

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.