We Wouldn't Be Too Quick To Buy Tai Sang Land Development Limited (HKG:89) Before It Goes Ex-Dividend

It looks like Tai Sang Land Development Limited (HKG:89) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Tai Sang Land Development's shares before the 10th of September in order to receive the dividend, which the company will pay on the 27th of September.

The company's next dividend payment will be HK$0.04 per share, and in the last 12 months, the company paid a total of HK$0.08 per share. Looking at the last 12 months of distributions, Tai Sang Land Development has a trailing yield of approximately 3.8% on its current stock price of HK$2.11. 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 Tai Sang Land Development can afford its dividend, and if the dividend could grow.

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 reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 21% of its free cash flow as dividends last year, which is conservatively low.

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?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tai Sang Land Development has seen its dividend decline 3.1% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Get our latest analysis on Tai Sang Land Development's balance sheet health here.

The Bottom Line

Is Tai Sang Land Development an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Tai Sang Land Development.

With that in mind though, if the poor dividend characteristics of Tai Sang Land Development don't faze you, it's worth being mindful of the risks involved with this business. For instance, we've identified 3 warning signs for Tai Sang Land Development (1 is significant) you should be aware of.

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.