Don't Race Out To Buy Trio Industrial Electronics Group Limited (HKG:1710) Just Because It's Going Ex-Dividend

Readers hoping to buy Trio Industrial Electronics Group Limited (HKG:1710) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Trio Industrial Electronics Group's shares on or after the 23rd of June, you won't be eligible to receive the dividend, when it is paid on the 14th of July.

The company's next dividend payment will be HK$0.012 per share, on the back of last year when the company paid a total of HK$0.012 to shareholders. Calculating the last year's worth of payments shows that Trio Industrial Electronics Group has a trailing yield of 8.5% on the current share price of HK$0.142. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Trio Industrial Electronics Group distributed an unsustainably high 140% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.

See our latest analysis for Trio Industrial Electronics Group

Click here to see how much of its profit Trio Industrial Electronics Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Trio Industrial Electronics Group's earnings per share have fallen at approximately 17% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Trio Industrial Electronics Group's dividend payments per share have declined at 7.0% per year on average over the past seven years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is Trio Industrial Electronics Group an attractive dividend stock, or better left on the shelf? Not only are earnings per share shrinking, but Trio Industrial Electronics Group is paying out a disconcertingly high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

With that being said, if you're still considering Trio Industrial Electronics Group as an investment, you'll find it beneficial to know what risks this stock is facing. For example - Trio Industrial Electronics Group has 3 warning signs we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.