Time Watch Investments Limited (HKG:2033) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Time Watch Investments' shares on or after the 27th of November, you won't be eligible to receive the dividend, when it is paid on the 12th of December.

The company's next dividend payment will be HK$0.017 per share. Last year, in total, the company distributed HK$0.017 to shareholders. Calculating the last year's worth of payments shows that Time Watch Investments has a trailing yield of 5.2% on the current share price of HK$0.33. If you buy this business for its dividend, you should have an idea of whether Time Watch Investments's dividend is reliable and sustainable. As a result, readers should always check whether Time Watch Investments has been able to grow its dividends, or if the dividend might be cut.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Time Watch Investments paid out a comfortable 43% of its profit last year. 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. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Time Watch Investments paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Time Watch Investments's earnings per share have plummeted approximately 36% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Time Watch Investments has seen its dividend decline 8.2% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Has Time Watch Investments got what it takes to maintain its dividend payments? Earnings per share have fallen significantly, although at least Time Watch Investments paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. All things considered, we are not particularly enthused about Time Watch Investments from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Time Watch Investments, you should know about the other risks facing this business. Our analysis shows 4 warning signs for Time Watch Investments that we strongly recommend you have a look at before investing in the company.

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.