Is It Worth Considering Tien Wah Press Holdings Berhad (KLSE:TIENWAH) For Its Upcoming Dividend?
Tien Wah Press Holdings Berhad (KLSE:TIENWAH) is about to trade ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase Tien Wah Press Holdings Berhad's shares on or after the 8th of July, you won't be eligible to receive the dividend, when it is paid on the 31st of July.
The company's next dividend payment will be RM00.028 per share. Last year, in total, the company distributed RM0.056 to shareholders. Last year's total dividend payments show that Tien Wah Press Holdings Berhad has a trailing yield of 7.5% on the current share price of RM00.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Tien Wah Press Holdings Berhad paid out 149% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. Fortunately, it paid out only 33% of its free cash flow in the past year.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Tien Wah Press Holdings Berhad fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
Check out our latest analysis for Tien Wah Press Holdings Berhad
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Tien Wah Press Holdings Berhad has grown its earnings rapidly, up 30% a year for the past five years.
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 3.5% 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
Is Tien Wah Press Holdings Berhad worth buying for its dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Tien Wah Press Holdings Berhad is paying out so much of its profit. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Tien Wah Press Holdings Berhad's dividend merits.
On that note, you'll want to research what risks Tien Wah Press Holdings Berhad is facing. In terms of investment risks, we've identified 4 warning signs with Tien Wah Press Holdings Berhad and understanding them should be part of your investment process.
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.