Tianjin Tianbao Energy (HKG:1671) Is Increasing Its Dividend To HK$0.061

Tianjin Tianbao Energy Co., Ltd.'s (HKG:1671) dividend will be increasing to HK$0.061 on 3rd of August. This will take the annual payment from 5.9% to 5.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Tianjin Tianbao Energy

Tianjin Tianbao Energy's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Tianjin Tianbao Energy's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 25.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 74%, which is definitely feasible to continue.

Tianjin Tianbao Energy's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2019, the dividend has gone from CN¥0.08 to CN¥0.05. Dividend payments have fallen sharply, down 38% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Tianjin Tianbao Energy's earnings per share has shrunk at 26% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Tianjin Tianbao Energy's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Tianjin Tianbao Energy you should be aware of, and 1 of them is concerning. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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