Just Four Days Till Telecom Digital Holdings Limited (HKG:6033) Will Be Trading Ex-Dividend

Telecom Digital Holdings Limited (HKG:6033) stock is about to trade ex-dividend in four days. You can purchase shares before the 9th of March in order to receive the dividend, which the company will pay on the 19th of March.

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 9.0% on the current share price of HK$2.44. 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! So we need to investigate whether Telecom Digital Holdings can afford its dividend, and if the dividend could grow.

View our latest analysis for Telecom Digital Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Telecom Digital Holdings paid out 94% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether Telecom Digital Holdings generated enough free cash flow to afford its dividend. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.

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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Telecom Digital Holdings earnings per share are up 3.3% per annum 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. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Telecom Digital Holdings for the upcoming dividend? 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. All things considered, we are not particularly enthused about Telecom Digital Holdings from a dividend perspective.

If you're not too concerned about Telecom Digital Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Case in point: We've spotted 1 warning sign for Telecom Digital Holdings you should be aware of.

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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