Deewin Tianxia Co., Ltd (HKG:2418) Goes Ex-Dividend Soon

Readers hoping to buy Deewin Tianxia Co., Ltd (HKG:2418) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Deewin Tianxia's shares before the 3rd of June to receive the dividend, which will be paid on the 23rd of August.

The company's upcoming dividend is CN¥0.04076 a share, following on from the last 12 months, when the company distributed a total of CN¥0.041 per share to shareholders. Based on the last year's worth of payments, Deewin Tianxia stock has a trailing yield of around 2.8% on the current share price of HK$1.55. If you buy this business for its dividend, you should have an idea of whether Deewin Tianxia's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Deewin Tianxia

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. Deewin Tianxia paid out more than half (61%) of its earnings last year, which is a regular payout ratio for most companies. 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. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Deewin Tianxia paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Deewin Tianxia's 20% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Given that Deewin Tianxia has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Deewin Tianxia worth buying for its dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Deewin Tianxia's dividend merits.

However if you're still interested in Deewin Tianxia as a potential investment, you should definitely consider some of the risks involved with Deewin Tianxia. Every company has risks, and we've spotted 3 warning signs for Deewin Tianxia (of which 2 are a bit concerning!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.