Tradelink Limited Ecommerce (HKG:536) the stock is set to trade ex-dividend in four days. The ex-dividend date is usually one business day before the record date which is the latest date by which you must be present on the books of the company as a shareholder in order to receive the dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. In other words, investors can buy shares of Tradelink Electronic Commerce before May 11 in order to be eligible for the dividend, which will be paid on May 25.
The company’s next dividend payout will be HK$0.065 per share, following last year when the company paid a total of HK$0.092 to shareholders. Based on the value of last year’s payouts, Tradelink Electronic Commerce stock has a yield of approximately 7.9% on the current stock price of HK$1.17. Dividends are an important source of income for many shareholders, but the health of the company is essential to sustaining those dividends. We therefore need to check whether dividend payments are covered and whether profits are increasing.
Check out our latest analysis for Tradelink Electronic Commerce
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Last year, Tradelink Electronic Commerce paid out 100% of its earnings as dividends, which is above a level we are comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to assess whether Tradelink Electronic Commerce has generated enough free cash flow to pay its dividend. Over the past year, it has paid out more than three-quarters (86%) of its free cash flow generated, which is quite high and could start to limit reinvestments in the business.
It’s good to see that even though Tradelink Electronic Commerce’s dividends weren’t well covered by earnings, they are at least affordable from a cash flow perspective. Yet if the company continues to pay out such a high percentage of its profits, the dividend could be at risk if business turns sour.
Click here to see how much profit Tradelink Electronic Commerce has paid out over the past 12 months.
Have earnings and dividends increased?
Stocks with stable earnings can still be attractive dividend payers, but it’s important to be more conservative in your approach and demand a greater margin of safety when it comes to dividend sustainability. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. It is not encouraging to see that the profits of Tradelink Electronic Commerce have indeed been stable over the past five years. It’s better than seeing them fall, sure, but over the long term, all the best dividend-paying stocks have the potential to significantly increase their earnings per share.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. It looks like Tradelink Electronic Commerce’s dividends are largely the same as they were 10 years ago.
Should Investors Buy Tradelink Electronic Commerce for the Next Dividend? Earnings per share have been flat lately, which we suspect is better than seeing them decline. Additionally, Tradelink Electronic Commerce pays out a fairly high percentage of its profits and more than half of its cash flow, so it is difficult to assess whether the company is reinvesting enough in its business to improve its situation. It’s not that we think Tradelink Electronic Commerce is a bad company, but these characteristics don’t usually lead to outstanding dividend performance.
However, if you are still interested in Tradelink Electronic Commerce and want to learn more, it will be very useful for you to know what risks this title faces. Be aware that Tradelink Electronic Commerce displays 2 warning signs in our investment analysisand 1 of them cannot be ignored…
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.