Tian Lun Gas Holdings Limited (HKG:1600) Will Pay A CN¥0.046 Dividend In Four Days

Tian Lun Gas Holdings Limited (HKG:1600) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Tian Lun Gas Holdings investors that purchase the stock on or after the 22nd of October will not receive the dividend, which will be paid on the 28th of November.

The company's next dividend payment will be CN¥0.046 per share, on the back of last year when the company paid a total of CN¥0.15 to shareholders. Based on the last year's worth of payments, Tian Lun Gas Holdings stock has a trailing yield of around 4.6% on the current share price of HK$3.42. 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! We need to see whether the dividend is covered by earnings and if it's growing.

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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. Fortunately Tian Lun Gas Holdings's payout ratio is modest, at just 48% of profit. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 23% of its cash flow last year.

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.

View our latest analysis for Tian Lun Gas Holdings

Click here to see how much of its profit Tian Lun Gas Holdings 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Tian Lun Gas Holdings's 18% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, Tian Lun Gas Holdings has increased its dividend at approximately 8.3% a year on average.

To Sum It Up

Should investors buy Tian Lun Gas Holdings for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

In light of that, while Tian Lun Gas Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 3 warning signs with Tian Lun Gas Holdings (at least 1 which is significant), and understanding them should be part of your investment process.

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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.