Four Days Left To Buy Times China Holdings Limited (HKG:1233) Before The Ex-Dividend Date

By
Simply Wall St
Published
May 20, 2021
SEHK:1233
Source: Shutterstock

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 Times China Holdings Limited (HKG:1233) is about to go ex-dividend in just 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Times China Holdings' shares before the 25th of May in order to receive the dividend, which the company will pay on the 2nd of July.

The company's upcoming dividend is CN¥0.77 a share, following on from the last 12 months, when the company distributed a total of CN¥0.77 per share to shareholders. Looking at the last 12 months of distributions, Times China Holdings has a trailing yield of approximately 8.1% on its current stock price of HK$11.46. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Times China Holdings

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Times China Holdings paid out a comfortable 30% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Times China Holdings paid out more free cash flow than it generated - 144%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Times China Holdings paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Times China Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
SEHK:1233 Historic Dividend May 20th 2021

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Times China Holdings has grown its earnings rapidly, up 25% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last seven years, Times China Holdings has lifted its dividend by approximately 32% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy Times China Holdings for the upcoming dividend? We like that Times China Holdings has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in Times China Holdings for the dividends alone, you should always be mindful of the risks involved. For example, Times China Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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