It looks like Tat Seng Packaging Group Ltd (SGX:T12) is about to go ex-dividend in the next 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. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Tat Seng Packaging Group’s shares before the 9th of May in order to be eligible for the dividend, which will be paid on the 24th of May.
The company’s next dividend payment will be S$0.02 per share, on the back of last year when the company paid a total of S$0.045 to shareholders. Last year’s total dividend payments show that Tat Seng Packaging Group has a trailing yield of 6.3% on the current share price of S$0.71. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Tat Seng Packaging Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Fortunately Tat Seng Packaging Group’s payout ratio is modest, at just 38% of profit. A useful secondary check can be to evaluate whether Tat Seng Packaging Group generated enough free cash flow to afford its dividend. What’s good is that dividends were well covered by free cash flow, with the company paying out 24% of its cash flow last year.
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 Tat Seng Packaging Group 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 earnings fall far enough, the company could be forced to cut its dividend. It’s not encouraging to see that Tat Seng Packaging Group’s earnings are effectively flat over the past five years. It’s better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Tat Seng Packaging Group has lifted its dividend by approximately 8.4% a year on average.
Final Takeaway
Is Tat Seng Packaging Group worth buying for its dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It’s definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. To summarise, Tat Seng Packaging Group looks okay on this analysis, although it doesn’t appear a stand-out opportunity.
So while Tat Seng Packaging Group looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For example – Tat Seng Packaging Group has 2 warning signs we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
