We wouldn’t be too quick to buy Trio Industrial Electronics Group Limited (HKG: 1710) before it becomes ex-dividend
Trio Industrial Electronics Group Limited (HKG: 1710) is set to trade ex-dividend within the next two days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because any share transaction must have been settled before the registration date to be eligible for a dividend. Therefore, if you buy shares of Trio Industrial Electronics Group on or after June 9, you will not be able to receive the dividend when it is paid on July 5.
The company’s next dividend is HK $ 0.012 per share, following the last 12 months when the company has distributed a total of HK $ 0.016 per share to shareholders. Based on the value of last year’s payouts, Trio Industrial Electronics Group stock has a rolling yield of around 9.6% on the current price of HK $ 0.25. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. Accordingly, readers should always check whether Trio Industrial Electronics Group has been able to increase its dividends or if the dividend could be reduced.
Check out our latest review for Trio Industrial Electronics Group
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Trio Industrial Electronics Group pays an acceptable level of 69% of its profits, a payment level common to most companies. Having said that, even very profitable companies can sometimes not generate enough cash to pay the dividend, which is why we always need to check if the dividend is covered by cash flow. It has paid more than half (50%) of its free cash flow in the past year, which is within an average range for most companies.
It is positive to see that the Trio Industrial Electronics Group dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher large safety margin before the dividend is cut.
Click here to see how much profit Trio Industrial Electronics Group has paid in the past 12 months.
Have profits and dividends increased?
Companies with declining profits are riskier for dividend shareholders. If profits fall enough, the company could be forced to cut its dividend. Trio Industrial Electronics Group profits collapsed faster than Wile E Coyote’s ploys to trap the Road Runner; down 32% per year over the past five years.
Many investors will assess a company’s dividend yield by evaluating how much dividend payments have changed over time. Over the past three years, Trio Industrial Electronics Group has increased its dividend to around 6.3% per year on average. It’s interesting, but the combination of a growing dividend despite declining profits can usually only be achieved by paying a larger share of the company’s profits. It can be valuable to shareholders, but it cannot last forever.
From a dividend perspective, should investors buy or avoid Trio Industrial Electronics Group? It’s never good to see earnings per share go down, but at least the dividend payout ratios look reasonable. We are aware, however, that if earnings continue to decline, the dividend could be at risk. It’s not the most attractive proposition from a dividend standpoint, and we would probably drop this one for now.
That said, if you look at this stock without worrying too much about the dividend, you should still be familiar with the risks involved with Trio Industrial Electronics Group. To help you, we have discovered 4 warning signs for Trio Industrial Electronics Group (1 is significant!) That you should know before buying the stocks.
A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.
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