Trio Industrial Electronics Group Limited’s (HKG: 1710) the dividend will increase on July 5 to HK $ 0.012, with investors receiving 50% more than last year. This will bring the dividend yield to an attractive rate of 8.1%, which will give returns for shareholders a good boost.

While dividend yield is important for income investors, it is also important to take into account any significant change in the price of the shares, as this will generally outweigh the gains from distributions. Investors will be delighted to see that the share price of Trio Industrial Electronics Group has risen 44% in the past 3 months, which is good for shareholders and may also explain a drop in dividend yield.

Check out our latest review for Trio Industrial Electronics Group

Trio Industrial Electronics Group does not earn enough to cover its payments

We like to see robust dividend yields, but it doesn’t matter if the payout isn’t sustainable. Based on the last payment, Trio Industrial Electronics Group was earning comfortably enough to cover the dividend. This indicates that a large portion of the profits are reinvested in the business, with the aim of fueling growth.

If the company can’t turn the tide, EPS could drop 31.6% over the next year. If the dividend continues according to recent trends, we estimate that the payout ratio could reach 152%, which could put the dividend at risk if the company’s earnings do not improve.

Trio Industrial Electronics Group dividend lacks consistency

Looking back, the dividend has been volatile, but with a relatively short history, we think it may be a bit early to draw conclusions about the sustainability of the dividend over the long term. The dividend went from HK $ 0.02 in 2018 to the last annual payment of HK $ 0.024. This implies that the company has increased its distributions at an annual rate of approximately 6.3% over that period. It’s good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Trio Industrial Electronics Group may have cleaned up since then, but we remain cautious.

The potential for dividend growth is fragile

Growth in earnings per share could be a mitigating factor considering past dividend fluctuations. Earnings per share have declined 32% over the past three years. This sharp drop may indicate that the company is going through a difficult time, which could limit its ability to pay a larger dividend each year in the future.

In summary

In summary, while it’s always good to see the dividend increasing, we don’t think Trio Industrial Electronics Group payouts are strong. In the past, payments have been volatile, but in the short term the dividend could be reliable as the company generates enough cash. We don’t think Trio Industrial Electronics Group is a good stock to add to your portfolio if income is your goal.

It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an irregular policy. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. Just as an example we have encountered 4 warning signs for Trio Industrial Electronics Group you must be aware of this, and one of them must not be ignored. We have also set up a list of global stocks with a solid dividend.

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