Tian An China Investments (HKG:28) Has Announced A Dividend Of HK$0.20

Tian An China Investments Company Limited (HKG:28) will pay a dividend of HK$0.20 on the 29th of April. This means the dividend yield will be fairly typical at 5.2%.

Check out our latest analysis for Tian An China Investments

Tian An China Investments' Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Tian An China Investments' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Unless the company can turn things around, EPS could fall by 23.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 29%, which is definitely feasible to continue.

Tian An China Investments Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from HK$0.04 in 2012 to the most recent annual payment of HK$0.20. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Tian An China Investments' EPS has fallen by approximately 24% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Tian An China Investments' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Tian An China Investments (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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