Four Days Left Until Telecom Digital Holdings Limited (HKG:6033) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Telecom Digital Holdings Limited (HKG:6033) is about to trade ex-dividend in the next four days. You can purchase shares before the 8th of December in order to receive the dividend, which the company will pay on the 21st of December.

Telecom Digital Holdings's upcoming dividend is HK$0.06 a share, following on from the last 12 months, when the company distributed a total of HK$0.22 per share to shareholders. Calculating the last year's worth of payments shows that Telecom Digital Holdings has a trailing yield of 9.6% on the current share price of HK$2.3. If you buy this business for its dividend, you should have an idea of whether Telecom Digital Holdings's dividend is reliable and sustainable. So we need to investigate whether Telecom Digital Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Telecom Digital 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. Last year, Telecom Digital Holdings paid out 94% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.

It's good to see that while Telecom Digital Holdings's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Click here to see how much of its profit Telecom Digital Holdings paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Telecom Digital Holdings, with earnings per share up 3.3% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past six years, Telecom Digital Holdings has increased its dividend at approximately 33% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Telecom Digital Holdings an attractive dividend stock, or better left on the shelf? Earnings per share have grown modestly, and last year Telecom Digital Holdings paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. In summary, while it has some positive characteristics, we're not inclined to race out and buy Telecom Digital Holdings today.

If you want to look further into Telecom Digital Holdings, it's worth knowing the risks this business faces. Our analysis shows 1 warning sign for Telecom Digital Holdings and you should be aware of it before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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