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Is It Smart To Buy Tsit Wing International Holdings Limited (HKG:2119) Before It Goes Ex-Dividend?

Tsit Wing International Holdings Limited (HKG:2119) is about to trade ex-dividend in the next 2 days. You will need to purchase shares before the 27th of April to receive the dividend, which will be paid on the 22nd of May.

Tsit Wing International Holdings's next dividend payment will be HK$0.033 per share. Last year, in total, the company distributed HK$0.067 to shareholders. Last year's total dividend payments show that Tsit Wing International Holdings has a trailing yield of 6.6% on the current share price of HK$1.01. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Tsit Wing International Holdings has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Tsit Wing International Holdings

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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. Fortunately Tsit Wing International Holdings's payout ratio is modest, at just 50% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 39% of its free cash flow in the past year.

It's positive to see that Tsit Wing International Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Tsit Wing International Holdings paid out over the last 12 months.

SEHK:2119 Historical Dividend Yield April 24th 2020
SEHK:2119 Historical Dividend Yield April 24th 2020

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Tsit Wing International Holdings, with earnings per share up 8.7% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Given that Tsit Wing International Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

From a dividend perspective, should investors buy or avoid Tsit Wing International Holdings? Earnings per share have been growing moderately, and Tsit Wing International Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Tsit Wing International Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. Tsit Wing International Holdings looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Tsit Wing International Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 4 warning signs for Tsit Wing International Holdings that you should be aware of before investing in their shares.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.