Just Three Days Till Tan Chong Motor Holdings Berhad (KLSE:TCHONG) Will Be Trading Ex-Dividend

Tan Chong Motor Holdings Berhad (KLSE:TCHONG) is about to trade ex-dividend in the next three days. You can purchase shares before the 11th of December in order to receive the dividend, which the company will pay on the 28th of December.

Tan Chong Motor Holdings Berhad's next dividend payment will be RM0.015 per share, and in the last 12 months, the company paid a total of RM0.03 per share. Based on the last year's worth of payments, Tan Chong Motor Holdings Berhad stock has a trailing yield of around 2.6% on the current share price of MYR1.16. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Tan Chong Motor Holdings Berhad can afford its dividend, and if the dividend could grow.

View our latest analysis for Tan Chong Motor Holdings Berhad

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Tan Chong Motor Holdings Berhad paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Tan Chong Motor Holdings Berhad didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 2.3% of its free cash flow as dividends last year, which is conservatively low.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Tan Chong Motor Holdings Berhad was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tan Chong Motor Holdings Berhad's dividend payments per share have declined at 13% per year on average over the past 10 years, which is uninspiring.

We update our analysis on Tan Chong Motor Holdings Berhad every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Tan Chong Motor Holdings Berhad worth buying for its dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So if you want to do more digging on Tan Chong Motor Holdings Berhad, you'll find it worthwhile knowing the risks that this stock faces. For example - Tan Chong Motor Holdings Berhad has 2 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

If you’re looking to trade Tan Chong Motor Holdings Berhad, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.