Yahoo Finance Don't Race Out To Buy TKH Group N.V. (AMS:TWEKA) Just Because It's Going Ex-Dividend
It looks like TKH Group N.V. (AMS:TWEKA) is about to go ex-dividend in the next 3 days. You can purchase shares before the 11th of May in order to receive the dividend, which the company will pay on the 15th of May.
TKH Group's next dividend payment will be €1.50 per share. Last year, in total, the company distributed €1.50 to shareholders. Based on the last year's worth of payments, TKH Group has a trailing yield of 4.8% on the current stock price of €31.1. If you buy this business for its dividend, you should have an idea of whether TKH Group's dividend is reliable and sustainable. As a result, readers should always check whether TKH Group has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for TKH Group
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. TKH Group paid out 91% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 54% of its free cash flow as dividends, within the usual range for most companies.
It's good to see that while TKH Group's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. TKH Group's earnings per share have fallen at approximately 5.2% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. TKH Group has delivered an average of 12% per year annual increase in its dividend, based on the past ten years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. TKH Group is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
Final Takeaway
Is TKH Group worth buying for its dividend? It's never fun to see a company's earnings per share in retreat. What's more, TKH Group is paying out a majority of its earnings and over half its free cash flow. It's hard to say if the business has the financial resources and time to turn things around without cutting the dividend. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of TKH Group.
With that in mind though, if the poor dividend characteristics of TKH Group don't faze you, it's worth being mindful of the risks involved with this business. For example - TKH Group has 5 warning signs we think you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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