Read This Before Considering Tai Sin Electric Limited (SGX:500) For Its Upcoming S$0.016 Dividend

Tai Sin Electric Limited (SGX:500) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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, Tai Sin Electric investors that purchase the stock on or after the 31st of October will not receive the dividend, which will be paid on the 9th of November.

The company's next dividend payment will be S$0.016 per share, and in the last 12 months, the company paid a total of S$0.024 per share. Based on the last year's worth of payments, Tai Sin Electric stock has a trailing yield of around 5.9% on the current share price of SGD0.4. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Tai Sin Electric

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. Tai Sin Electric is paying out an acceptable 65% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 83% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 Tai Sin Electric paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Tai Sin Electric's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. A high payout ratio of 65% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Tai Sin Electric could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tai Sin Electric's dividend payments are effectively flat on where they were 10 years ago.

To Sum It Up

Has Tai Sin Electric got what it takes to maintain its dividend payments? Tai Sin Electric has struggled to grow its earnings per share, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear unsustainable. All things considered, we are not particularly enthused about Tai Sin Electric from a dividend perspective.

If you want to look further into Tai Sin Electric, it's worth knowing the risks this business faces. Our analysis shows 2 warning signs for Tai Sin Electric and you should be aware of them before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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

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.