The board of Tai Sang Land Development Limited (HKG:89) has announced it will be reducing its dividend by 25% from last year's payment of HK$0.04 on the 29th of September, with shareholders receiving HK$0.03. This means that the annual payment is 4.4% of the current stock price, which is lower than what the rest of the industry is paying.

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Tai Sang Land Development Might Find It Hard To Continue The Dividend

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. While Tai Sang Land Development is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

EPS has fallen by an average of 36.0% in the past, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

See our latest analysis for Tai Sang Land Development

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was HK$0.13 in 2015, and the most recent fiscal year payment was HK$0.09. This works out to be a decline of approximately 3.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Tai Sang Land Development's EPS has declined at around 36% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Tai Sang Land Development has 3 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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