Tsit Wing International Holdings Limited (HKG:2119) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Tsit Wing International Holdings' shares before the 28th of August to receive the dividend, which will be paid on the 13th of September.

The company's next dividend payment will be HK$0.0276 per share. Last year, in total, the company distributed HK$0.041 to shareholders. Last year's total dividend payments show that Tsit Wing International Holdings has a trailing yield of 6.8% on the current share price of HK$0.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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.

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. Tsit Wing International Holdings paid out 57% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Tsit Wing International Holdings generated enough free cash flow to afford its dividend. Fortunately, it paid out only 28% 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.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Tsit Wing International Holdings's earnings are down 3.4% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Tsit Wing International Holdings's dividend payments per share have declined at 6.8% per year on average over the past five years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Has Tsit Wing International Holdings got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's hard to get excited about Tsit Wing International Holdings from a dividend perspective.

If you're not too concerned about Tsit Wing International Holdings's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Be aware that Tsit Wing International Holdings is showing 4 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.