Tianjin Development Holdings' (HKG:882) Upcoming Dividend Will Be Larger Than Last Year's

Tianjin Development Holdings Limited's (HKG:882) dividend will be increasing to HK$0.055 on 25th of July. This takes the dividend yield from 5.5% to 5.5%, which shareholders will be pleased with.

Check out our latest analysis for Tianjin Development Holdings

Tianjin Development Holdings' Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Tianjin Development Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, EPS could fall by 0.7% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 19%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Tianjin Development Holdings Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from HK$0.066 in 2014 to the most recent annual payment of HK$0.089. This works out to be a compound annual growth rate (CAGR) of approximately 3.8% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. However, Tianjin Development Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Tianjin Development Holdings' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Tianjin Development Holdings' payments are rock solid. While Tianjin Development Holdings is earning enough to cover the payments, the cash flows are lacking. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Tianjin Development Holdings (1 doesn't sit too well with us!) that you should be aware of before investing. Is Tianjin Development Holdings not quite the opportunity you were looking for? Why not check out 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.