Stock Analysis

Tai Cheung Holdings (HKG:88) Is Due To Pay A Dividend Of HK$0.12

SEHK:88
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The board of Tai Cheung Holdings Limited (HKG:88) has announced that it will pay a dividend on the 16th of September, with investors receiving HK$0.12 per share. This means that the annual payment will be 4.8% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Tai Cheung Holdings

Tai Cheung Holdings Might Find It Hard To Continue The Dividend

Solid dividend yields are great, but they only really help us if the payment is sustainable. Even though Tai Cheung Holdings isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Recent, EPS has fallen by 18.5%, so this could continue over the next year. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

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SEHK:88 Historic Dividend July 2nd 2021

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was HK$0.27 in 2011, and the most recent fiscal year payment was HK$0.24. The dividend has shrunk at around 1.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Tai Cheung Holdings' EPS has fallen by approximately 18% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Tai Cheung Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Tai Cheung Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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