Yahoo Finance Don't Buy TT Electronics plc (LON:TTG) For Its Next Dividend Without Doing These Checks
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see TT Electronics plc (LON:TTG) is about to trade ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. In other words, investors can purchase TT Electronics' shares before the 11th of April in order to be eligible for the dividend, which will be paid on the 15th of May.
The company's next dividend payment will be UK£0.0465 per share, and in the last 12 months, the company paid a total of UK£0.068 per share. Based on the last year's worth of payments, TT Electronics has a trailing yield of 4.4% on the current stock price of UK£1.54. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether TT Electronics has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for TT Electronics
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. TT Electronics lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. 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 cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Fortunately, it paid out only 29% of its free cash flow in the past year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. TT Electronics reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. TT Electronics has delivered an average of 2.3% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Remember, you can always get a snapshot of TT Electronics's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Is TT Electronics an attractive dividend stock, or better left on the shelf? 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. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of TT Electronics.
With that being said, if you're still considering TT Electronics as an investment, you'll find it beneficial to know what risks this stock is facing. For instance, we've identified 2 warning signs for TT Electronics (1 makes us a bit uncomfortable) you should be aware of.
If you're in the market for strong dividend payers, we recommend checking 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.
