Yahoo Finance Do These 3 Checks Before Buying Tien Wah Press Holdings Berhad (KLSE:TIENWAH) For Its Upcoming Dividend
It looks like Tien Wah Press Holdings Berhad (KLSE:TIENWAH) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Tien Wah Press Holdings Berhad's shares on or after the 5th of July will not receive the dividend, which will be paid on the 31st of July.
The company's next dividend payment will be RM00.028 per share, on the back of last year when the company paid a total of RM0.056 to shareholders. Based on the last year's worth of payments, Tien Wah Press Holdings Berhad has a trailing yield of 6.5% on the current stock price of RM00.865. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Tien Wah Press 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. Last year Tien Wah Press Holdings Berhad paid out 104% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. 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. Tien Wah Press Holdings Berhad paid out more free cash flow than it generated - 194%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Cash is slightly more important than profit from a dividend perspective, but given Tien Wah Press Holdings Berhad's payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.
Click here to see how much of its profit Tien Wah Press Holdings Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Tien Wah Press Holdings Berhad has grown its earnings rapidly, up 24% a year for the past five years. Earnings per share are increasing at a rapid rate, but the company is paying out more than we are comfortable with, based on current earnings. Fast-growing businesses normally need to reinvest most of their earnings in order to maintain growth, so we'd suspect that either earnings growth will slow or the dividend may not be increased for a while.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Tien Wah Press Holdings Berhad has seen its dividend decline 9.7% per annum on average over the past 10 years, which is not great to see. Tien Wah Press Holdings Berhad is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Has Tien Wah Press Holdings Berhad got what it takes to maintain its dividend payments? Earnings per share have been growing, despite the company paying out a concerningly high percentage of its earnings and cashflow. We struggle to see how a company paying out so much of its earnings and cash flow will be able to sustain its dividend in a downturn, or reinvest enough into its business to continue growing earnings without borrowing heavily. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
With that in mind though, if the poor dividend characteristics of Tien Wah Press Holdings Berhad don't faze you, it's worth being mindful of the risks involved with this business. Our analysis shows 2 warning signs for Tien Wah Press Holdings Berhad that we strongly recommend you have a look at before investing in the company.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
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