It looks like Tai Sang Land Development Limited (HKG:89) is about to go ex-dividend in the next 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Tai Sang Land Development investors that purchase the stock on or after the 28th of May will not receive the dividend, which will be paid on the 18th of June.

The company's next dividend payment will be HK$0.06 per share, on the back of last year when the company paid a total of HK$0.12 to shareholders. Calculating the last year's worth of payments shows that Tai Sang Land Development has a trailing yield of 5.2% on the current share price of HK$2.31. If you buy this business for its dividend, you should have an idea of whether Tai Sang Land Development's dividend is reliable and sustainable. As a result, readers should always check whether Tai Sang Land Development 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. Tai Sang Land Development lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 21% of its free cash flow last year.

Click here to see how much of its profit Tai Sang Land Development paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Tai Sang Land Development reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Tai Sang Land Development has lifted its dividend by approximately 0.9% a year on average.

Get our latest analysis on Tai Sang Land Development's balance sheet health here.

The Bottom Line

Should investors buy Tai Sang Land Development for the upcoming dividend? It's hard to get used to Tai Sang Land Development paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering Tai Sang Land Development as an investment, you'll find it beneficial to know what risks this stock is facing. For instance, we've identified 3 warning signs for Tai Sang Land Development (1 is concerning) you should be aware of.

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.