Tat Seng Packaging Group Ltd (SGX:T12) Stock Goes Ex-Dividend In Just Four Days
It looks like Tat Seng Packaging Group Ltd (SGX:T12) is about to go ex-dividend in the next 4 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Tat Seng Packaging Group investors that purchase the stock on or after the 15th of September will not receive the dividend, which will be paid on the 30th of September.
The company's upcoming dividend is S$0.01 a share, following on from the last 12 months, when the company distributed a total of S$0.06 per share to shareholders. Calculating the last year's worth of payments shows that Tat Seng Packaging Group has a trailing yield of 5.9% on the current share price of S$1.01. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! 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. Tat Seng Packaging Group paid out 61% of its earnings to investors last year, a normal payout level for most businesses. 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. It paid out an unsustainably high 300% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since Tat Seng Packaging Group is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
Tat Seng Packaging Group paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Tat Seng Packaging Group to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Check out our latest analysis for Tat Seng Packaging Group
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?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Tat Seng Packaging Group's earnings per share have fallen at approximately 7.6% 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. In the past 10 years, Tat Seng Packaging Group has increased its dividend at approximately 12% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
To Sum It Up
Is Tat Seng Packaging Group an attractive dividend stock, or better left on the shelf? Tat Seng Packaging Group had an average payout ratio, but its free cash flow was lower and earnings per share have been declining. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
With that in mind though, if the poor dividend characteristics of Tat Seng Packaging Group don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 2 warning signs for Tat Seng Packaging Group (1 shouldn't be ignored!) that deserve your attention before investing in the shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.